Prana Educational and Charitable Trust Kochoth House V. State of Kerala
This case deals with Section 138 of the Negotiable Instruments Act, 1881 which covers the offence of Cheque Bouncing. The accused is Prana Educational And Charitable Trust Kochoth House and Sheeba Kochoth is the Managing Trustee. A cheque of Rs 9,50,000 was issued to the complainant by the accused which came to be dishonoured for the reason of “funds insufficient”. Thereafter, the complainant launched a prosecution against the accused under Section 138 of the Negotiable Instruments Act. The Trial Court convicted the accused for offence under Section 138 of the Negotiable Instruments Act. The accused appealed against the conviction before the Sessions Judge which failed. Following this the accused filed a revision petition in the High Court of Kerala.
- Can a Trust (an Artificial Person) be prosecuted alleging commission of offence punishable under Section 138 of the N.I. Act?
- Whether private or public charitable Trust to be recognized as a juristic person for the purpose of the N.I. Act?
- Whether Trust, either private or public, is a company in terms of Section 141 of the N.I. Act?
Section 141 of the Negotiable Instruments Act, 1881
“Every person who was in charge of, and was responsible to the Company for the conduct of business of the Company at the time the offence was committed, will be guilty of the offence under Section 138 of the N.I. Act.”
In the above section, the term ‘Company’ is interpreted in an elaborate manner so as to include ‘Trust’ within its definition and thus a Trust is termed as a juristic person within the meaning of section 141 of N.I. Act and can be prosecuted for offence under section 138 of the N.I. Act.
In order to arrive at the above conclusion, the principle of Ejusdem Generis has been applied in furtherance of securing the ends of Justice. It literally means ‘of the same kind’ and hence ‘Trust’ is construed Ejusdem Generis with ‘Company’.
The accused’s primary argument was that the prosecution against the Charitable Trust and the Managing Trustee is not legally admissible because the Trust is not a juristic person as defined by Section 141 of the N.I. Act.
The learned counsels for the accused relied on the decision of K.P. Shibu and others v. State of Kerala and another [2019 (3) KHC 1]
In the aforementioned ruling the Court held that a Trust cannot be prosecuted alleging commission of offence punishable under Section 138 of the N.I. Act.
Since, Trust is neither a corporation nor an association of individuals, as per Section 141 of the Negotiable Instruments Act, the same is not maintainable.
The learned counsel for the complainant argued that in a decision of Madras High Court it was held that a Trust which is an artificial body can be prosecuted only with a fine or compensation though section 138 of the N.I. Act prescribes compulsory sentence of imprisonment. While considering whether a private or public charitable Trust is a juristic person, the learned single judge ruled that under Section 7 of the N.I. Act, a drawer of the cheque is an individual who writes a cheque, and that under section 138 of the N.I. Act, if a drawer fails to pay the cheque amount as demanded in a notice, the drawer is subject to punishment. Consequently, it is undeniable that a public charitable trust, being a drawer, is punishable under the N.I. Act.
Apart from this, the learned counsel for the Complainant also relied on a Bombay High Court (Aurangabad Bench) Judgement of “The Dadasaheb Rawal Co-op. Bank of Dondaicha Ltd v. Ramesh and others.” It opined that a “company” may include any corporate body and an association of individuals. The term association of individuals will include club, trust, HUF Business, etc and must apply the principle of ejusdem generis which means of the same kind in nature.
The Court held that the contentions raised by the learned counsel for the accused cannot be sustained because the evidence clearly shows that a cheque of Rs. 19,50,000 that was issued by the accused to the complainant came to be dishonoured. The burden of duty lies on the accused to rebut such presumptions of the existence of a legally enforceable debt or liability but no real evidence was given by the accused for rebuttal of such presumptions. Nothing substantiated is drawn from the contentions of the accused that calls for revision of the conviction imposed by the Trial Court and Appellate Court. Furthermore, the revisional jurisdiction of the High Court need not be treated as a second appellate court. It is not appropriate for the Court to reappreciate the evidence and make a conclusion on the same evidence that has already been appreciated by the Magistrate and Sessions Judge in appeal, unless the decision that is sought to be revised causes grave miscarriage of justice. Hence, in view of the above it is needless to interfere with the decisions of the Trial Court and Appellate Court and thus the revision petition fails.
In the case of Prana Educational and Charitable Trust Kochoth House V. State of Kerala, the court examines whether a Trust falls within the definition of a juristic entity and is a company under Section 141 of the N.I. Act, and can therefore be prosecuted under section 138 of the N.I. Act.
The above issues are interconnected and the Court has relied on the various judgements of Madras, Gujarat and Bombay High Courts cited by the Complainant. Section 141 states that a Company is inclusive of a Corporate Body or other “association of individuals” and the term “association of individuals” will include club, trust, HUF business, etc. The principle of Ejusdem Generis meaning “of the same kind” is applied here. Hence a Trust can be termed as a Juristic entity. The doctrine of Ejusdem Generis is intended for the construction of constitutional and statutory provisions. In the present case the principle has been used correctly and applied in a necessary manner. It must be used cautiously otherwise it will undermine the purpose of the statute and lead to a miscarriage of justice. The case law cited in the arguments of the accused is not satisfactory in nature because it fails to interpret the statute in an elaborate manner for the purpose of securing the ends of justice. The definition of “company” under section 141 is interpreted very narrowly.
The statutory presumption drawn under section 118 and 139 of the N.I. Act establishes a ‘reverse onus’ clause which means that if it is shown that signatures of the accused are on the cheque, the obligation shifts on the accused to discharge the presumption imposed on him. In the present case the accused are blatantly admitting to issuing a cheque to the complainants for discharge of liability by giving a defence that prosecution of a Trust under section 138 of the N.I. Act is not maintainable. Thus, it shows that the accused are aware of their illegal actions and are trying to give mischievous reasons to avoid prosecution.
The Court has rightly interpreted the scope of its revisional jurisdiction. There was no need to interfere with the decisions of Trial Court and Sessions Judge because their rulings were justified in accordance with law and no substantiate evidence was drawn by the accused which called for revision of the convictions.
In the case of Prana Educational and Charitable Trust Kochoth House V. State of Kerala the Court has delivered a clear picture regarding the prosecution of a Trust for the offence under section 138 of the N.I. Act. The doctrine of Ejusdem Generis has been applied in an appropriate manner and it has been thus rightly concluded that ‘Trust’ can be termed as a juristic person within definition of Company under section 141 of the N.I. Act.