Rina Sanjiv Kamdar v. Mr. Murlidhar T. Tilwani

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 material time when the offence was committed alone shall be deemed to be guilty of the offence. Further it was observed that the requirement of law is that: (Comp Cas p.

112) “[T]here must be clear, unambiguous and specific allegations against the persons who are impleaded as accused that they were in charge of and responsible to the company in the conduct of its business at the 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. Therefore, the Court refused to quash the complaint. In Sunil Kumar Chhaparia v. Dakka Eshwaraiah [(2002) 108 Comp Cas 687 (AP)] the Andhra Pradesh High Court noted that there was a consensus of judicial opinion that: (Comp Cas p. 691) “[A] director of a company cannot be prosecuted for an offence under Section 138 of the Act in the absence of a specific allegation in the complaint that he was in charge of and responsible to the company in the conduct of its business at the relevant time or that the offence was committed with his consent or connivance.” The Court has quoted several judgments of various High Courts in support of this proposition. We do not feel it necessary to recount them all.”

9. The said Reference is answered by three Judge Bench of the Supreme Court in S.M.S. Pharmaceuticals Ltd.(supra) in paragraph 19 as follows:

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.

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. Section 138 of the Negotiable Instruments Act, 1881 is enacted in order to safeguard the credibility of commercial transactions and to prevent bouncing of cheques by providing personal liability against the drawer of the cheque. In case of a cheque issued by the firm, the drawer of the cheque is the firm. In case of cheque issued by the business firm of Joint Hindu Family, all the members can be roped into as the drawers of the cheques though signatory is one of them. Under these circumstances, the impugned order is unsustainable. The learned Sessions Judge failed to see that quashing of the process at the premature stage was not called for in view of the Explanation appended to section 141 of the Negotiable Instruments Act. In any case, at such a premature stage, the process ought not to have been quashed against the respondent Nos. 1 and 2. The prospective defence of the respondent Nos. 1 and 2 could not be a sufficient 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.”

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 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 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 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 coowners will not constitute an Association of Individuals in terms of section 141 of the Act. In a HUF, the members do not become coowners by their own volition and there is also no common purpose in their coownership. As has been held by the Hon'ble Supreme Court, each member of the HUF can act in regard to his or her share without any request or obligation to the other owners. They do not automatically become an Association of persons/body of individuals. Thus, the law laid down by the Hon'ble Supreme Court squarely applies to the Negotiable Instruments Act, for the purpose of understanding the definition of the term 'company' and thus, an HUF can not be a company in terms of section 141 of the Act. Therefore, the petitioners who were before the Court as individual members of the HUF, shall not be held vicariously liable for the offence committed by the Karta of the HUF. While so holding, the Court extensively dealt with various decisions of the Apex Court and other High Courts. It would be profitable to reproduce some of the relevant findings and observations, which read 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 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, 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 Roofing Tiles Manufactures Association and another v. The State of Gujarat and another, (1976) 4 SCC 601, the Hon'ble Supreme Court has held that "though the word "include" is generally used in interpretation clauses as a word of enlargement, in some cases the context might suggest a different intention". When the liberty of the subject is involved having penal consequences, then, the word 'include' should receive strict interpretation and not liberal interpretation. Therefore, it should be interpreted having reference to the context of the Act. Admittedly, the term company includes an Association of Individuals. Had it been the intention of the Parliament to bring in a HUF within the meaning of the term company, as it has been done in the other enactments, like The Income Tax Act, it would have specifically included the same in express terms in this Act also. The very fact that it has not been done so would only reflect the intention of the Parliament not to include a HUF as a company in 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 Honble 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 Honble 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 Honble 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, 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 Honble 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 Honble Supreme Court has held as follows: 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

(iii) 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.

16. Thus, in the above judgments, since there is a specific inclusion of HUF into the meaning of the term person, the Honble Supreme Court held that a HUF is a person for the purpose of the above enactments. As we have already seen, there is no such specific inclusion of the HUF in the definition of the term company in the Negotiable Instruments Act.

17. In the same judgment, nextly, the Honble Supreme Court had to consider the question as to whether the coowners are together a person.

9. Normally, where a group of persons have not become coowners 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 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 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, they will not become an association of persons/body of individuals. Mere purchase under a common deed without anything more, will not convert a co ownership 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 Honble 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 Honble 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 coowners will not constitute an Association of Individuals in terms of Section 141 of the Act. In a HUF, the members do not become coowners by their own volition and there is also no common purpose in their coownership. As has been held by the Honble Supreme Court, each member of the HUF can act in regard to his or her share without any request or obligation to the other owners. They do not automatically become an Association of persons/body of individuals. Thus, the law laid down by the Honble Supreme Court squarely applies to the Negotiable Instruments Act, for the purpose of understanding the definition of the term company and thus, a HUF can not be a company in terms of Section 141 of the Act.

19. But, the learned counsel for the petitioner has relied on a judgement of the Andhra Pradesh High Court in Jagadish Rai Agarwal and Ors v State of Andhra Pradesh and Ors (cited supra) wherein a quite contrary view has been taken. This is a case relating to Negotiable Instruments Act. While considering the same question, the Andhra Pradesh High Court has 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 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 by the Bombay High Court and the Andhra Pradesh High Court, in view of my foregoing discussions and the law laid down by the Honble 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 subclause (1) shall be deemed to have committed the offence, if it is proved that the offence has been committed with his consent or connivance or is attributable to neglect on his part. As per the Explanation appended to Section 141, partners are equated to a Company and its Directors. The definition of Company includes the companies incorporated, partnership firms and other association of individuals. 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.

23. Before the learned Judge, the judgement of the Andhra Pradesh High Court in Sri Jagadish Rai Agarwal and Others Vs. State of Andhra Pradesh and Others (cited supra) was cited. Having referred to the same, the learned Judge has observed as follows: with due respect to the Honble Single Judge of the Andhra Pradesh High Court, this Court is not able to accept such a blanket proposition without a qualification that such cheque should have been issued in respect of an account maintained in the name of the HUF in order to hold the members of the HUF responsible for the dishonour of such cheque equating them with a Director of a company.

24. A close reading of the said judgment of 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.”

14. It 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[3].

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

(ii) Whether co-ownership, per se, is an 'association of persons/body of individuals' and therefore, constitutes a 'person'?

(iii) Whether the ten purchasers, who became co-owners of the land, together constitute a 'body of individuals/association of persons' and therefore a 'person' within the meaning of that expression in the Ceiling Act?

(iv) Whether the partition dated 30.12.1971 among the co-owners is 'deemed to have been made in anticipation to defeat the object of Gujarat Agricultural Lands Ceiling (Amendment) Act, 1972' under section 8(1) of the Ceiling Act; and if so what is the effect of failure to make an application under sub-section (2) of section 8 of the Ceiling Act.

(v) What would be the position if some of the co-owners were non- agriculturists at the time of purchase of the lands? Whether the Mamlatdar can examine this issue when considering the question of surplus land under the Ceiling Act? ”

16. Thus, the question involved in Ramanlal Patel (supra) was whether the definition of “person” in the Gujarat Ceiling Act includes a body of individuals. In Gujarat Ceiling Act “joint family” and “person” are defined under Section 2(16) and 2(21) as follows: “2. Definitions.-- In this 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;” 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 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 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 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 Representation of People Act 1950, is "person" does not include a body of persons.

17. Both definitions of the word 'person', in General Clauses Act and Ceiling Act, are inclusive definitions. The inclusive definition of 'person' in General Clauses Act applies to all Gujarat Act unless there is anything repugnant in the subject or the context. The inclusive definition of 'person' in section 2(21) of the Ceiling Act, does not indicate anything repugnant to the definition of 'person' in General Clauses Act, but merely adds 'joint family' to 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 “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[4] 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 assessment of Hindu undivided family. This conclusion is strengthened by Section 25-A of the Indian Income Tax Act, 1922 which provides for the assessment of Hindu undivided family after its partition.”

Thus, it is clear that the Supreme Court was considering the scope of Section 3 of the Income Tax Act, 1922, which classifies the assessee under the heads “individuals”, “Hindu Undivided Families”, “Companies”, “Local Authorities”, “Firms” and “Other Associations of Persons”. The Supreme Court has observed that 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”. 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.

19. For the above reasons, with respect, I am unable to agree with the decision of the Gujarat High Court.

20. A Division Bench of this Court in the case of Commissioner of Income-Tax vs. Thana Electricity Supply Ltd.[5] was considering the concept of binding precedent and particularly whether a decision of one High Court is binding on another High Court and inter alia held as follows:

“20. From the foregoing discussion, the following propositions emerge: (a) The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme 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 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 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 judgments 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. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution.” Thus, the Division Bench of this Court after analysing the law laid down by the Supreme Court has held that 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 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. Thus, the above referred Gujarat High Court judgment in the case of Shah Nitinkumar (supra) will have only persuasive value and the judgment of a learned Single Judge of this Court in Dadasaheb (supra) will be the judgment which will be binding precedent as far as this Court is concerned. I completely agree with the observations of the learned Single Judge of the Bombay High Court in the case of Dadasaheb (supra) and more particularly made in paragraph 11 above.

21. Accordingly, for the above reasons the Criminal Application is dismissed, however, with no order as to costs. (MADHAV J. JAMDAR, J.)