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CHEQUE BOUNS CASE

Negotiable Instruments Act, 1881-ss.141 & 138: Dishonour of cheque issued by proprietorship firm-Complaint against its employee-Held: Proprietary concern is not a company within meaning of s.141-Hence employee of such a concern cannot be proceeded against-Code of Criminal Procedure, 1973-s.482. Officence by company-Vicarious liability of the Director. Code of Civil Procedure, 1908-Order XXX, Rules 1 and 10-Partnership firm and proprietorship firm-Distinction between-Re-iterated. Respondent No. 1 filed complaint petition alleging commission of offence under Section 138 of the Negotiable Instruments Act. It was alleged that a cheque was issued by accused nos.2 to 6 for a sum of Rs. 2 Lakhs which on presentation was dishonoured. Accused no.1 was described as a business concern. Appellant arrayed as accused no. 3 was described as In charge, Manager, Director of accused no. 1. The Metropolitan Magistrate issued summons to the accused persons. Appellant filed application before High Court u/s. 482 CrPC for quashing the summons issued to him. The application was dismissed. Hence the present appeal. =Allowing the appeal, the Court HELD: 1. The concept of vicarious liability was introduced in penal statutes like Negotiable Instruments Act to make the Directors, partners or other persons, in charge of and control of the business of the Company or otherwise responsible for its affairs; the Company itself being a juristic person. [Para 8] [889-d] 2. A bare perusal of the complaint petition would show that the accused No. 1 was described therein as `a business concern’. It was not described as Company or a partnership firm or an Association of Persons. The description of the accused in the complaint petition is absolutely vague. A juristic person can be a Company within the meaning of the provisions of the Companies Act, 1956 or a partnership within the meaning of the provisions of the Indian Partnership Act, 1932 or an association of persons which ordinarily would mean a body of persons which is not incorporated under any statute. A proprietary concern, however, stands absolutely on a different footing. A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for conduct of its affairs. A proprietary concern is not a Company. Company in terms of the explanation appended to Section 141 of the Negotiable Instruments Act, means any body- corporate and includes a firm or other association of individuals. Director has been defined to mean in relation to a firm, a partner in the firm. Thus, whereas in relation to a Company, incorporated and registered under the Companies Act, 1956 or any other statute, a person as a Director must come within the purview of the said description, so far as a firm is concerned, the same would carry the same meaning as contained in the Indian Partnership Act. In view of the said description of “Director”, other than a person who comes within the purview thereof, nobody else can be prosecuted by way of his vicarious liability in such a capacity. If the offence has not been committed by a Company, the question of there being a Director or his being vicariously liable, therefore, would not arise. [Paras 7, 9 and 10] [889-c; E-g; 890-A] 3. Appellant categorically contended that accused No. 1 was a proprietary concern of the accused No. 2 and he was merely an employee thereof. If accused No. 1 was not a Company within the meaning of Section 141 of the Negotiable Instruments Act, the question of an employee being proceeded against in terms thereof would not arise. Respondent was aware of the difference between a `partnership firm’ and a `business concern’ as would be evident from the fact that it described itself as a partnership firm and the accused No. 1, as a business concern. Significantly, Respondent deliberately or otherwise did not state as to in which capacity the appellant had been serving the said business concern. It described him as in charge, Manager and Director of the accused No. 1. A person ordinarily cannot serve both in the capacity of a Manager and a Director of a Company. [Paras 11 and 12] [890-b-d] 4. The distinction between partnership firm and a proprietary concern is well known. It is evident from Order XXX Rule 1 and Order XXX Rule 10 of the Code of Civil Procedure. It is trite that a proprietary concern would not answer the description of either a Company incorporated under the Indian Companies Act or a firm within the meaning of the provisions of Section 4 of the Indian Partnership Act. [Paras 13 and14] [890-e; 891-d] S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, A.I.R. (2005) SC 3512, followed. Sahitha Ramamurthy & Anr. v. R.B.S. Channabasavaradhya, A.I.R. (2006) SC 3086 and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2007) 3 SCALE 245, relied on. M/s. Ashok Transport Agency v. Awadhesh Kumar and Anr., [1998] 5 SCC 567, referred to. 5. For the reasons aforementioned, this Court is unable to agree with the High Court that no case had been made out for exercise of its jurisdiction under Section 482 of the Code of Criminal Procedure. The complaint case against the appellant is quashed. [Paras 16 and 17] [891-f] G. Sivabalamurugan, Y. Arvnagiri and L.K. Pandey for the Appellant. Tatini Basu (for Sudhir Nandrajog) for the Respondent.

CASE NO.:
Bill of exchange

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Appeal (crl.) 485 of 2007

PETITIONER:
Raghu Lakshminarayanan

RESPONDENT:
M/s. Fine Tubes

DATE OF JUDGMENT: 05/04/2007

BENCH:
S.B. Sinha & Markandey Katju

JUDGMENT:
J U D G M E N T

CRIMINAL APPEAL NO. 485 2007
[Arising out of S.L.P. (Crl.) No. 4211 of 2006]

S.B. SINHA, J.
 Leave granted.


 Appellant before us was arrayed as accused No. 3 in the Complaint 
Petition filed by the first respondent herein, before the Chief Metropolitan 
Magistrate, Delhi which was registered as a Complaint Case No. 
379/1/2003. The said complaint petition was filed for trying the accused 
persons named therein for commission of an offence under Section 138 of 
the Negotiable Instruments Act alleging that a cheque dated 15.8.2002 was 
issued by the accused Nos. 2 to 6 for a sum of Rs. 2 lacs drawn at Canara 
Bank which on presentation was dishonored and the accused despite notice, 
did not pay the said amount. 

 The status of the accused No. 1 was not disclosed in the array of the 
accused persons.
 
 It was sought to be represented through 
Director(s)/Chairman/Managing Director, Proprietor(s), Incharge(s). 
Appellant herein was also described in similar capacity viz. "in charge, 
manager, director of the accused No. 1". So were the other respondents. 

 In the complaint petition, however, it was alleged ;

"1. The complainant is a partnership duly registered with 
the Registrar of firms at Delhi, and Mohit Gupta is 
one of its partner and duly authorized and empowered 
to file this complaint for and on behalf of the 
complainant.

2. That the respondent No. 1 is a business concern and 
the respondent Nos. 2 and 6, alongwith other 
officer(s) etc., are its disclosed in charges, Managers, 
Director (s) and partners as they have through out 
been dealings with the complainant by representing 
themselves to be so responsible for the dealings and 
day to day working of the respondent No. 1."


 The learned Chief Metropolitan Magistrate issued summons on the 
other accused persons relying or on the basis of the averments made in the 
said complaint petition filed by the respondent herein. An application filed 
by the appellant herein for quashing the summons issued to him in an 
application filed before the High Court under Section 482 of the Code of 
Criminal Procedure was dismissed stating;

"After the pre-summoning evidence was recorded the 
learned MM found that prima facie case was made out 
against all the accused persons and, therefore, summoned 
these accused. challenging these summoning orders accused 
No. 3 has filed this petition under Section 482 Cr. P.C. it is 
inter alia, contended that he was never the director of the 
said accused No. 1: cheque in question was not signed by 
him and that he was not responsible for the conduct of 
business of accused No. 1 it is the case of the petitioner that 
he was an employee of the accused No. 1. In support 
appointment letter dated 15.7.2000 is enclosed as per which 
petitioner was appointed as "Director-Production". In this 
capacity he was to be responsible for entire production, 
including machine selection as well as labour, process and 
material management. Thereafter, vide letter dated 
21.10.2001, which is also produced by the petitioner, he was 
asked to head the marketing department and was given the 
designation "Director-Marketing". Prima facie, as Director-
Marketing the petitioner was in-charge of the marketing 
division of the accused No. 1. I find that there are specific 
averment made in the complaint that the petitioner in that 
capacity was dealing with the complainant and was handling 
day-to-day affairs of the accused No. 1. Therefore, what 
the petitioner contends are the disputed questions of fact and 
it forms his defence which is to be led before the Trial 
Court. Such questions cannot be entertained in this petition 
under Section 482 Cr.P.C."
 A bare perusal of the complaint petition would show that the accused 
No. 1 was described therein as 'a business concern'. It was not described as 
a Company or a partnership firm or an Association of Persons. 

 The concept of vicarious liability was introduced in penal statutes like 
Negotiable Instruments Act to make the Directors, partners or other persons, 
in charge of and control of the business of the Company or otherwise 
responsible for its affairs; the Company itself being a juristic person.

 The description of the accused in the complaint petition is absolutely 
vague. A juristic person can be a Company within the meaning of the 
provisions of the Companies Act, 1956 or a partnership within the meaning 
of the provisions of the Indian Partnership Act, 1932 or an association of 
persons which ordinarily would mean a body of persons which is not 
incorporated under any statute. A proprietary concern, however, stands 
absolutely on a different footing. A person may carry on business in the 
name of a business concern, but he being proprietor thereof, would be solely 
responsible for conduct of its affairs. A proprietary concern is not a 
Company. Company in terms of the explanation appended to Section 141 
of the Negotiable Instruments Act, means any body- corporate and includes 
a firm or other association of individuals. Director has been defined to 
mean in relation to a firm, a partner in the firm. Thus, whereas in relation to 
a Company, incorporated and registered under the Companies Act, 1956 or 
any other statute, a person as a Director must come within the purview of the 
said description, so far as a firm is concerned, the same would carry the 
same meaning as contained in the Indian Partnership Act.

 It is interesting to note that the term "Director" has been defined. It is 
of some significance to note that in view of the said description of 
"Director", other than a person who comes within the purview thereof, 
nobody else can be prosecuted by way of his vicarious liability in such a 
capacity. If the offence has not been committed by a Company, the 
question of there being a Director or his being vicariously liable, therefore, 
would not arise.

 Appellant herein categorically contended that accused No. 1 was a 
proprietary concern of the accused No. 2 and he was merely an employee 
thereof.

 If accused No. 1 was not a Company within the meaning of Section 
141 of the Negotiable Instruments Act, the question of an employee being 
preceded against in terms thereof would not arise. Respondent was aware 
of the difference between a 'partnership firm' and a 'business concern' as 
would be evident from the fact that it described itself as a partnership firm 
and the accused No. 1, as a business concern. Significantly, Respondent 
deliberately or otherwise did not state as to in which capacity the appellant 
had been serving the said business concern. It, as noticed hereinbefore, 
described him as in charge, Manager and Director of the accused No. 1. A 
person ordinarily cannot serve both in the capacity of a Manager and a 
Director of a Company.

 The distinction between partnership firm and a proprietary concern is 
well known. It is evident from Order XXX Rule 1 and Order XXX Rule 10 
of the Code of Civil Procedure. The question came up for consideration also 
before this Court in M/s. Ashok Transport Agency v. Awadhesh Kumar and 
another [(1998) 5 SCC 567] wherein this Court stated the law in the 
following terms:-

"6. A partnership firm differs from a proprietary 
concern owned by an individual. A partnership is 
governed by the provisions of the Indian Partnership 
Act, 1932. Though a partnership is not a juristic person 
but Order XXX, Rule 1, CPC enables the partners of a 
partnership firm to sue or to be sued in the name of the 
firm. A proprietary concern is only the business name 
in which the proprietor of the business carries on the 
business. A suit by or against a proprietary concern is 
by or against the proprietor of the business. In the 
event of the death of the proprietor of a proprietary 
concern, it is the legal representatives of the proprietor 
who alone can sue or be sued in respect of the dealings 
of the proprietary business. The provisions of Rule 10 
of Order XXX, which make applicable the provisions 
of Order XXX to a proprietary concern enable the 
proprietor of a proprietary business to be sued in the 
business names of his proprietary concern. The real 
party who is being sued is the proprietor of the said 
business. The said provision does not have the effect of 
converting the proprietary business into a partnership 
firm. The provisions of Rule 4 of Order XXX have no 
application to such a suit as by virtue of Order XXX, 
Rule 10 the other provisions of Order XXX are 
applicable to a suit against the proprietor of proprietary 
business "in sofar as the nature of such case permits." 
This means that only those provisions of Order XXX 
can be made applicable to proprietary concern which 
can be so made applicable keeping in view the nature of 
the case."

 We, keeping in view the allegations made in the complaint petition, 
need not dilate in regard to the definition of a 'Company' or a 'Partnership 
Firm' as envisaged under Section 34 of the Companies Act, 1956 and 
Section 4 of the Indian Partnership Act, 1932 respectively, but, we may 
only note that it is trite that a proprietary concern would not answer the 
description of either a Company incorporated under the Indian Companies 
Act or a firm within the meaning of the provisions of the Section 4 of the 
Indian Partnership Act. 

 A Constitution Bench of this Court in S.M.S. Pharmaceuticals Ltd. v. 
Neeta Bhalla [A.I.R. 2005 SC 3512] furthermore categorically stated that the 
complaint petition must contain the requisite averments to bring about a case 
within the purview of Section 141 of the Act so as to make some persons 
other than company vicariously liable therefor. [See also Sabitha 
Ramamurthy & Anr. v. R.B.S. Channabasavaradhya [A.I.R. 2006 SC 3086] 
and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [2007 (3) SCALE 245]. 

 For the reasons aforementioned, we are unable to agree with the High 
Court that no case had been made out for exercise of its jurisdiction under 
Section 482 of the Code of Criminal Procedure.

 The impugned judgment is set aside. Appeal is allowed. The 
complaint case against the appellant is quashed.
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