top of page
Search

Sole Proprietor can be prosecuted under section 138 NI Act, without arraying the proprietorship firm


The Punjab & Haryana High Court held that non-arraying of the proprietorship firm/concern is not an impediment in proceeding against the sole proprietor under Section 138 of the Act.


The Single Judge Bench of the Punjab & Haryana High Court was recently hearing a Petition of the accused of dishonour of cheque and held that non-arraying of the proprietorship firm/concern is not an impediment in proceeding against the sole proprietor under Section 138 of the Act. A sole Proprietor can be prosecuted under section 138 NI Act, without arraying the proprietorship firm.


Facts:

In the present case, the main contention raised was that petitioner No.1 and petitioner No.2 the Director thereof, cannot be prosecuted for the cheque having been drawn on account of the proprietorship firm, which was not an accused in the complaint. Even petitioner No.2, being a sole proprietor, cannot be prosecuted without the proprietorship firm, being arrayed as an accused in the complaint, in the same manner as the Directors cannot be held vicariously liable, in a case of a company not having been arrayed.


Analysis:

The settled law is that a person who is the signatory to the cheque which is drawn by that person on an account maintained by him and the same has been issued for the discharge, in whole or in part, of any debt or other liability, which has been returned by the bank unpaid, such person can be said to have committed an offence.


The High Court noted as per the dictum by the Hon’ble Supreme Court of India, in the case of Rangappa v. Sri Mohan, REED 2010 SC 05001, wherein it has been held that once issuance of a cheque and signature hereon are admitted, the presumption, as envisaged in Section 118 of the Act, can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption.


The presumptions raised under Section 118(b) and Section 139 of the NI Act are rebuttable. The reverse onus is cast on the accused, who has to establish a probable defence on the standard of preponderance of probabilities to prove that either there was no legally enforceable debt or other liability.


Accordingly, cheques not having been drawn on the account of petitioner No.1- private limited company, which was a separate legal entity, the complaint qua it, is not maintainable.


With regard to liability in so far as petitioner No.2, sole proprietor, in absence of the firm is not arrayed as an accused, is concerned, the exposition of law as settled by Hon'ble The Supreme Court in the case of Raghu Lakshminarayanan v. M/s. Fine Tubes (2007) 5 SCC 103, drew a clear distinction emerging therefrom that only the proprietor can be held liable under Section 138 of the Act, as the proprietorship concern has no separate legal identity, it means and includes sole proprietor and vice versa. Thus, a sole proprietorship firm would not fall within the ambit and scope of Section 141 of the Act, the proprietor and the firm being one and the same.


The sine qua non for an offence under Section 138 of the Act is that the cheque must be drawn on an account maintained by the accused and admittedly, it was the case of the petitioners themselves that in the present case, cheques were drawn on the account of the proprietorship concern on the account on which the cheques in question were drawn on the account maintained by the sole proprietor of sole proprietorship firm- M/s Royal Pressing and Components, who signed the same. There was no denial that he was not the sole proprietor of the aforesaid firm or that he did not sign the cheques in question, the legal notice of demand was sent by registered AD post at the address as mentioned in Annexure P-5, which was the Central Excise registration certificate as appended and relied upon by the petitioners themselves and was the same address as that of petitioner No.2, mentioned in this petition and in the complaint, but was refused to be accepted by him, which as per Section 27 of the General Clause Act gives rise to a presumption that service of notice has been effected when it was sent to the correct address by registered post, unless and until the contrary was proved by the addressee.


"It is quite apparent from the facts of the case that petitioner no.2 has tried to avoid his liability of a legally enforceable debt, he has not disputed his signatures on the cheques either in the petition or during the course of arguments, leading to a presumption as envisaged in Section 118 of the Act legally inferring that the cheque was drawn for consideration on the date which the cheque bears and Section 139 of the Act enjoin on the Court to presume that the holder of the cheque received it for the discharge of any debt or liability, the burden of which was on the accused to rebut the said presumption, as held in the cases of Rangappa v. Sri Mohan, REED 2010 SC 05001," the High Court observed.


Hon’ble The Supreme Court of India in the case of Surinder Singh Deswal v. Virender Gandhi, while interpreting Section 148 of the Act observed that if such tactics are permitted, the very object and purpose of the enactment of Section 138 of the Act would be frustrated.


Thus, the High Court bench noted that in the present case, the complaint against petitioner no. 2 was maintainable.


Thus the Petitions were partly allowed.



댓글


bottom of page