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THE PERSON WHO IS NOT THE OWNER OF A FRIM/ WHO FAILED TO PROVE THAT HE IS THE OWNER OF THE FIRM , CANNOT FILE THE CASE -Section 7 of the Act 1881 defines “Payee” as the person named in the instrument, to whom or to whose order the money is by the 8

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 REPORTABLE

 IN THE SUPREME COURT OF INDIA

 CRIMINAL APPELLATE JURISDICTION

 CRIMINAL APPEAL NO. 643 OF 2011

 (Arising out of SLP(Crl.) No.3045 of 2008)

Milind Shripad Chandurkar ... Appellant

 Versus

Kalim M. Khan & Anr. ... Respondents

 J U D G M E N T 

Dr. B.S. CHAUHAN, J.

1. Leave granted.

2. This appeal has arisen out of judgment and order dated 

18.2.2008 passed by the High Court of Judicature at Bombay in 

Criminal Revision No.656 of 2007 by which the High Court has set 

aside the judgments and orders of the trial Court as well as of the 

Appellate Court convicting the respondent no.1 for the offences 

punishable under Section 138 of the Negotiable Instruments Act, 1881 

(hereinafter called the Act 1881) and sentencing him for the period, 

till the rising of the Court and to pay compensation of a sum of 

Rs.7,00,000/-. Failing which, the respondent would serve simple 

imprisonment for a period of six months.

3. The facts and circumstances giving rise to this case are that the 

appellant/complainant claimed to be the sole proprietor of the Firm, 

namely, Vijaya Automobiles, which had the business of supplying 

fuel. The firm had supplied a huge quantity of diesel to respondent 

no.1 in the month of March 2005. In order to meet the liability, the 

Respondent no.1 made the payment vide Cheque No.490592 dated 

28.4.2005 in the name of the said proprietary Firm drawn on 

Development Credit Bank, Kurla Branch, Bombay for an amount of 

Rs.7,00,000/- (Rupees seven lakhs only). The appellant/complainant 

deposited the said cheque in the account of the said Firm in Bank of 

India Uran Branch on 12.9.2005.

4. The Development Credit Bank returned the said cheque 

mentioning "unpaid" with a Memorandum "funds are insufficient". 

 2

The appellant/complainant sent notice dated 11.10.2005 by Registered 

A.D. post as well as under certificate of posting. The respondent 

no.1/accused did not accept the notice sent by Registered A.D. post. 

However, the notice sent by certificate of posting stood served upon 

him as the respondent no.1 admitted the said fact in his statement 

under Section 313 of the Code of Criminal Procedure, 1973 

(hereinafter called Cr.P.C.). The respondent no.1/accused neither 

replied to the notice, nor made the payment within 15 days of the 

receipt of the notice.

5. The appellant/complainant filed a complaint case no.545 of 

2005 before the Judicial Magistrate, First Class, Uran under section 

138 of the Act 1881 on 22.11.2005. The case was tried, however, the 

respondent no.1/accused did not enter the witness box and after 

considering the case, the trial Court vide judgment and order dated 

22.12.2006 concluded the trial convicting the respondent no.1 to 

suffer simple imprisonment till rising of the court and to pay 

compensation of Rs.7,10,000/- and in default of payment thereof, to 

suffer simple imprisonment for six months. It was directed that out of 

the aforesaid amount of compensation, a sum of Rs.10,000/- be 

credited to Raigad District Legal Aid Committee.

 3

6. Being aggrieved of the aforesaid judgment and order, the 

respondent no.1/accused filed Criminal Appeal No.85 of 2006. The 

learned Sessions Judge vide judgment and order dated 18-19/9/2007 

dismissed the said appeal, with the amount of compensation being 

reduced from Rs.7,10,000/- to Rs.7,00,000/-. Thus, the direction to 

credit the amount of Rs.10,000/- to Raigad District Legal Aid 

Committee was set aside. 

7. Being aggrieved, respondent no.1 preferred Criminal Revision 

Application No.656 of 2007 before the High Court which has been 

allowed vide judgment and order dated 18.2.2008 (impugned) only on 

the ground that the appellant could not produce any evidence to 

establish that he was the sole proprietor of the proprietary concern in 

question. Hence, this appeal.

8. We have heard Shri Shekhar Naphade, learned senior counsel 

for the appellant, Shri Viraj Kadam, learned counsel for respondent 

no.1 and Shri Shankar Chillarge, Additional Advocate General for 

respondent no.2 and perused the record. 

 All the three courts below have dealt with the issues elaborately 

and recorded the following findings of fact:- 

 4

(i) The cheque had been issued by the respondent no.1 in favour of 

 the Firm concerned towards discharge of pre-existing liability 

 and not as security.

(ii) The substantive sentence of imprisonment in default of 

 payment could be imposed.

 So far as the findings on the aforesaid two issues are concerned, 

the same are not under challenge before us. Learned counsel 

appearing for the respondents have accepted the aforesaid findings. 

9. The only issue involved herein is as to whether the appellant 

owns the said firm i.e., whether he is the proprietor of the said firm? 

The trial Court as well as the Appellate Court have held that a sole 

proprietary concern is no independent legal entity and its identity 

remains inseparable from its proprietor. But it merely remains a legal 

proposition. None of the said courts held that the appellant was the 

sole proprietor of the said firm. 

10. The High Court has set aside the judgments of the trial Court as 

well as the Appellate Court in Revision only on the ground that as the 

appellant did not produce any evidence to show that he was the 

proprietor of the Firm, he had no locus standi to file the complaint.

 5

11. The trial Court held that the complainant had deposed that he 

was proprietor of the Firm, namely, "Vijaya Automobiles" which had 

the business of supplying fuel etc. and the Firm had supplied the fuel 

on credit to respondent no.1/accused. The Court also took note of the 

pleadings taken by the respondent no.1/accused that he had given the 

cheque to the appellant for Vijaya Automobiles but it was as a 

security and not to meet any legal liability. Therefore, the respondent 

no.1/accused had admitted that the appellant had actual control over 

the said firm. The respondent no.1/accused admitted his signature on 

the cheque and execution of the cheque. Therefore, the presumptions 

under sections 118 and 139 of the Act 1881 were attracted. 

12. Dealing with the issue involved herein, the Appellate Court has 

noted that perusal of the cross-examination indicated that the 

appellant did not produce any documentary evidence to show that he 

was the proprietor of Vijaya Automobiles. Rather it was admitted by 

the appellant in the cross-examination that he did not have any 

documentary evidence to show that the complainant was the owner of 

the petrol pump. 

 6

13. In spite of making the aforesaid observations, the appeal was 

dismissed on the ground that admittedly diesel had been supplied to 

the respondent no.1/accused, and the said respondent had issued the 

cheque to meet the liability, which could not be encashed for want of 

funds. All other requirements in law, i.e., issuance of notice etc. also 

stood completed.

14. Relevant part of the affidavit filed by the appellant/complainant 

before the trial Court reads as under:

 "I, Shri Milind Shripad Chandurkar, Aged about 

 37 years, Indian Inhabitant, Occ. Business, 

 Proprietor of M/s. Vijay Automobiles, having 

 address at Sector-29, Dronagiri Node, Uran, Dist. 

 Raigad, take oath and state on solemn affirmation 

 as under.....

 I state that in due discharge of legal liability of the 

 accused as mentioned in foregoing paras, the 

 accused issued one cheque dtd. 28.4.2005 in my 

 name i.e. in the Name M/s. Vijaya Automobilies 

 which was drawn on Development Credit Bank, 

 Kurla Branch, Mumbai-70 bearing Cheque 

 No.490592, for Rs.7,00,000/- (Rupees Seven Lakhs 

 only)."

Relevant part of his cross-examination reads as under:-

 "It is true that till today I had not produced any 

 documentary evidence to show that I am owner of 

 Vijaya Automobiles......Till today I had not 

 produced any documentary evidence to support." 

 7

15. The complainant had also examined Shri S.K. Sharma, owner 

of M/s. Vikas Travels under whom the respondent no.1 had been 

working as a sub-contractor. In his cross-examination, Shri S.K. 

Sharma also stated as under:-

 "I have no documentary evidence to show that 

 complainant Milind Shripad Chandurkar owns the 

 petrol pump."

16. Thus, from the above, it is evident that the 

appellant/complainant could not produce any document to show that 

he was the proprietor of Vijaya Automobiles in spite of the fact that 

the issue had been agitated by the respondent no.1/accused at every 

stage. It is also evident from the documents on record that in the list 

of witnesses the complainant had mentioned the name of his banker as 

a witness, however, the said banker was not examined.

17. It may also be pertinent to mention here that appellant did not 

make any attempt to adduce additional evidence at the appellate stage 

also. No document has ever been filed to substantiate his averment in 

this regard.

18. Section 7 of the Act 1881 defines "Payee" as the person named 

in the instrument, to whom or to whose order the money is by the 

 8

instrument directed to be paid. Section 8 defines "the holder of the 

cheque" as any person entitled in his own name to the possession 

thereof and to receive or recover the amount due thereon from the 

parties thereto. Section 9 defines "holder in due course" as any person 

who for consideration became the possessor of a cheque if payable to 

a bearer or the payee or endorsee thereof. 

 Section 138 provides for penalties in case of dishonour of 

certain cheques for insufficiency of funds in the accounts. However, 

exception contained in clause (c) thereof reads as under: 

 "The drawer of such cheque fails to make the 

 payment of the said amount of money to the payee 

 or, as the case may be, to the holder in due course 

 of the cheque, within fifteen days of the receipt of 

 the said notice." (Emphasis added)

19. Section 142 provides for taking cognizance of the offence 

notwithstanding anything contained in Cr.P.C. which reads as under: 

 "(a) no court shall take cognizance of any offence 

 punishable under Section 138 except upon a 

 complaint, in writing, made by the payee or, as the 

 case may be, the holder in due course of the 

 cheque." (Emphasis added)

20. This Court in Shankar Finance and Investments v. State of 

Andhra Pradesh & Ors., (2008) 8 SCC 536, dealt with the issue 

 9

involved herein elaborately and held that where the "payee" is a 

proprietary concern the complaint can be filed (i) by the proprietor of 

the proprietary concern describing himself as the sole proprietor of the 

"payee"; (ii) the proprietary concern describing itself as the sole 

proprietary concern represented by its proprietor; and (iii) the 

proprietor or the proprietary concern represented by the Attorney 

Holder under the power of attorney executed by the sole proprietor. 

However, it shall not be permissible for an Attorney Holder to file the 

complaint in his own name as if he was the complainant. He can 

initiate criminal proceedings on behalf of the principal. 

 In a case of this nature, where the "payee" is a company or a 

sole proprietary concern, such issue cannot be adjudicated upon taking 

any guidance from Section 142 of the Act 1881 but the case shall be 

governed by the general law i.e. the Companies Act 1956 or by civil 

law where an individual carries on business in the name or style other 

than his own name. In such a situation, he can sue in his own name 

and not in trading name, though others can sue him in the trading 

name. So far as Section 142 is concerned, a complaint shall be 

maintainable in the name of the "payee", proprietary concern itself or 

in the name of the proprietor of the said concern. 

 1

 The Court placing reliance on earlier judgments, particularly, 

in Janki Vashdeo Bhojwani v. Indusind Bank Ltd., (2005) 2 SCC 

217, held that the general principles of company law or civil law 

would apply for maintaining the complaint under Section 138 of the 

Act 1881. 

21. In National small Industries Corporation Ltd. v. State (NCT 

of Delhi) & Ors., (2009) 1 SCC 407, this Court held as under: 

 "The term "complainant" is not defined under the 

 Code. Section 142 of the NI Act requires a 

 complaint under Section 138 of that Act to be 

 made by the payee (or by the holder in due 

 course)..."

22. Thus, in view of the above, the law stands crystallised to the 

effect that a person can maintain a complaint provided he is either a 

"payee" or "holder in due course" of the cheque. 

23. In the instant case, it is evident that the firm, namely, Vijaya 

Automobiles, has been the payee and that the appellant cannot claim 

to be the payee of the cheque, nor can he be the holder in due course, 

unless he establishes that the cheques had been issued to him or in his 

favour or that he is the sole proprietor of the concern and being so, he 

could also be payee himself and thus, entitled to make the complaint. 

 1

The appellant miserably failed to prove any nexus or connection by 

adducing any evidence, whatsoever, worth the name with the said 

firm, namely, Vijaya Automobiles. Mere statement in the affidavit in 

this regard, is not sufficient to meet the requirement of law. The 

appellant failed to produce any documentary evidence to connect 

himself with the said firm. It is evident that the firm had a substantial 

amount of business as in one month it sold the diesel to respondent no. 

1 - a single party, for a sum of Rs. 7 lakhs. The appellant would, in 

addition, have also been carrying out business with other persons. 

Thus, a person with such a big business must have had transactions 

with the bank and must have been a payee of income tax, sales tax etc. 

Thus, in such a fact-situation, there would be no dearth of material 

which could have been produced by the appellant to show that he was 

the sole proprietor of the said firm. The appellant failed to adduce any 

evidence in this regard, nor made any attempt to adduce any 

additional evidence at the appellate stage, in spite of the fact that the 

respondent is raising this issue from the initiation of the proceedings.

 1

24. In view of the above, we do not see any cogent reason to 

interfere with the impugned judgment and order of the High Court. 

The appeal is devoid of any merit and, accordingly, dismissed. 

 .........

 ..........................J.

 (P. SATHASIVAM)

 ...................................J.

 (Dr. B.S. CHAUHAN)

New Delhi,

March 3, 2011 

 1

 NON-REPORTABLE

 IN THE SUPREME COURT OF INDIA

 CRIMINAL APPELLATE JURISDICTION

 Special Leave Petition (Criminal) No.3122 of 2008

Milind Shripad Chandurkar ... Appellant

 Versus

Naimulla M. Khan & Anr. ... Respondents

 WITH

 Special Leave Petition (Criminal) No.3124 of 2008

 J U D G M E N T 

Dr. B.S. CHAUHAN, J.

1. In view of the judgment in Criminal Appeal No. 643 of 2011 

arising out of Special Leave Petition (Criminal) No. 3045 of 2008, the 

above Special Leave Petitions are dismissed. 

 .........

 ..........................J.

 (P. SATHASIVAM)

 ...................................J.

 (Dr. B.S. CHAUHAN)

New Delhi,

March 3, 2011  1
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Discussion

One thought on “THE PERSON WHO IS NOT THE OWNER OF A FRIM/ WHO FAILED TO PROVE THAT HE IS THE OWNER OF THE FIRM , CANNOT FILE THE CASE -Section 7 of the Act 1881 defines “Payee” as the person named in the instrument, to whom or to whose order the money is by the 8

  1. thank you

    Posted by parameshwar botla | 09/11/2011, 7:45 PM

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