Manoj Singh vs State Of U.P. And Another
2019 Latest Caselaw 4044 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

						A.F.R.
 
Court No. - 72
 

 
Case :- APPLICATION U/S 482 No. - 33417 of 2017
 
Applicant :- Manoj Singh
 
Opposite Party :- State Of U.P. And Another
 
Counsel for Applicant :- Sarita Mishra
 
Counsel for Opposite Party :- G.A.
 

 
Hon'ble Saumitra Dayal Singh,J.

1. Heard learned counsel for the parties.

2. The present 482 Cr.P.C. application has been filed to quash the judgment and order dated 27.07.2017 passed by Additional Sessions Judge, Court No.5, Allahabad in Criminal Revision No.345/2016 (Manoj Singh Vs. Shakeel Ahmad) as well as order dated 20.07.2016 passed by Additional Chief Judicial Magistrate, Court No.5, Allahabad in Complaint Case No.485 of 2014, under Section 138 Negotiable Instrument Act, P.S- Jhunsi, District-Allahabad.

3. Learned counsel for the applicant submits, the complaint is wholly incompetent since the cheque (giving rise to the complaint) was issued by the 'company' M/s Manoj Rice Mill that was not impleaded as an accused person (in the complaint). Reliance has been placed on Section 141 of the Negotiable Instrument Act, 1881 (hereinafter referred to as the Act). The issue is stated to be covered by a Single Judge decision of this Court in the Application u/s 482 No. 31101 of 2013 (Hitendra Kishan Lal Jain Vs. State of U.P. & Anr.), decided on 13.12.2017.

4. That case involved default/dishonour of a cheque issued by a proprietorship firm. After referring to Section 141 of the Act, and relying in decision of the Supreme Court in the case of Aneeta Haada Vs. Godfather Travels and Tours Private Limited and Anr., (2014) 6 SCC(Cri) 845, the learned Single Judge observed:-

"Since cheques in question were belonging to a Firm and vide explanation appended to Section 141 of the Negotiable Instrument Act, firms or other association of individual are also included in the word 'Company'. Hon'ble Supreme Court in the case of Aneeta Hada (supra) has clearly held that if cheque is issued by a Firm or Company, the Firm / Company must be arrayed as an accused. Same view has been expressed by the Hon'ble Supreme Court in the cases relied upon by the learned counsel for the applicant that until and unless Company or Firm is arrayed as an accused, director or other officials of the Company / Firm cannot be prosecuted / punished.

............................................................................Thus, on the sole ground of non-arraigning of the Firm as an accused in the complaint, the submissions raised by the learned counsel for the applicant that complaint proceedings are an abuse of process of law is acceptable. It is also pertinent to mention here that it will be immaterial whether the Firm running in the name and style of 'New Arihant Trading' is a proprietorship Firm or registered Firm."

5. Shri Madan Mohan Srivastava, learned counsel for the opposite party no. 2 and Sri Ankit Srivastava, learned AGA, on the other hand submit, the position in law is otherwise. The provision of Section 141 of the Act would not apply in the case of a sole proprietorship concern and that it would be restricted to a duly incorporated company or a partnership firm or an association of persons only.

6. Having heard learned counsel for the parties and having perused the record, in the first place there is no dispute to the fact that the applicant was running a sole proprietary concern in the name M/s Manoj Rice Mill. It was neither a partnership firm nor a company nor any other association of persons. Then, the provision of Section 141 of the Act reads:-

"141. Offences by companies.-

(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.-- For the purposes of this section,--

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm."

7. A plain reading of the provision makes it clear, if the person committing the offence is a "company", in that event every natural person responsible for such commission as also the artificial person namely the company shall be deemed to be guilty of the offence and be liable to be proceeded against and punished accordingly. Also, certain other natural persons may be held guilty, if so proved.

8. By way of the Explanation (a) attached to that provision of law, the term 'company' (specifically for the purpose of Section 141 of the Act), has been defined to mean a body corporate or a firm or any other association of individuals. In this statutory context, it calls for examination whether a sole proprietary concern, qualifies or falls within the meaning of the term 'company' or a 'firm' used in that provision.

9. There can be no doubt as to the meaning to be attributed to a "body corporate". That has to be an entity artificially incorporated, either by a special statute enacted to incorporate such corporations or under a general statute such as the Companies Act whereunder public and private companies are commonly incorporated, or a duly constituted entity given such status under a statute such as co-operative societies, local authorities etc. constituted under different enactments. However, it can never be understood to include a proprietorship firm that is neither incorporated nor constituted by or under any statute.

10. As to the meaning to be attributed to the words "association of individuals", the same has to be understood as an entity created by the free will of more than one individual, for furtherance of a common object or purpose. The use of the plural form of the word 'individual' itself leaves no room for any doubt in that regard. Then, for any 'association' of individuals to arise, there have to exist at least two individuals to form it. A single individual may never form an association with himself.

11. Thus, the phrase "association of individuals" necessarily requires such entity to be constituted by two or more individuals i.e. natural persons. On the contrary a sole-proprietorship concern, by very description does not allow for ownership to be shared or be joint and it defines, restricts and dictates the ownership to remain with one person only. Thus, "associations of individuals" are absolutely opposed to sole-proprietorship concerns, in that sense and aspect.

12. A 'partnership' on the other hand is a relationship formed between persons who willfully form such relationship with each other. Individually, in the context of that relationship, they are called 'partners' and collectively, they are called the 'firm', while the name in which they set up and conduct their business/activity (under such relationship), is called their 'firm name'.

13. While a partnership results in the collective identity of a firm coming into existence, a proprietorship is nothing more than a cloak or a trade name acquired by an individual or a person for the purpose of conducting a particular activity. With or without such trade name, it (sole proprietary concern) remains identified to the individual who owns it. It does not bring to life any new or other legal identity or entity. No rights or liabilities arise or are incurred, by any person (whether natural or artificial), except that otherwise attach to the natural person who owns it. Thus it is only a 'concern' of the individual who owns it. The trade name remains the shadow of the natural person or a mere projection or an identity that springs from and vanishes with the individual. It has no independent existence or continuity.

14. In the context of an offence under section 138 of the Act, by virtue of Explanation (b) to section 141 of the Act, only a partner of a 'firm' has been artificially equated to a 'director' of a 'company'. Its a legal fiction created in a penal statute. It must be confined to the limited to the purpose for which it has been created. Thus a partner of a 'firm' entails the same vicarious liability towards his 'firm' as 'director' does towards his 'company', though a partnership is not an artificial person. So also, upon being thus equated, the partnership 'firm' and its partner/s has/have to be impleaded as an accused person in any criminal complaint, that may be filed alleging offence committed by the firm. However, there is no indication in the statute to stretch that legal fiction to a sole proprietary concern.

15. Besides, in the case of a sole proprietary concern, there are no two persons in existence. Therefore, no vicarious liability may ever arise on any other person. The identity of the sole proprietor and that of his 'concern' remain one, even though the sole proprietor may adopt a trade name different from his own, for such 'concern'. Thus, even otherwise, conceptually, the principle contained in section 141 of the Act is not applicable to a sole-proprietary concern.

16. In the case of Ashok Transport Agency v. Awadhesh Kumar, (1998) 5 SCC 567, it has been held :

"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 "insofar 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." (emphasis supplied)

17. In Bhagwati Vanaspati Traders v. Supt. of Post Offices, (2015) 1 SCC 617, it has been held:

"11. We find merit in the second contention advanced at the hands of the learned counsel for the appellant. It is indeed true, that the NSC was purchased in the name of M/s Bhagwati Vanaspati Traders. It is also equally true, that M/s Bhagwati Vanaspati Traders is a sole proprietorship concern of B.K. Garg, and as such, the irregularity committed while issuing the NSC in the name of M/s Bhagwati Vanaspati Traders, could have easily been corrected by substituting the name of M/s Bhagwati Vanaspati Traders with that of B.K. Garg. For, in a sole proprietorship concern an individual uses a fictional trade name, in place of his own name".

(emphasis supplied)

18. Directly relevant to the question raised in the present proceedings, in Raghu Lakshminarayanan v. Fine Tubes, (2007) 5 SCC 103, it was observed:

"8. The concept of vicarious liability was introduced in penal statutes like the 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.

9. 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 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 Partnership Act.

10. 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.

11.......

12.......

13........

14. 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 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 Companies Act or a firm within the meaning of the provisions of Section 4 of the Partnership Act".

(emphasis supplied)

19. The Madras High Court, in Sri Sivasakthi Industries Vs. Arihant Metal Corporation 1992 (74) Company Cases 749, P. Muthuraman Vs. Padmavathi Finance (Regd) 1994 (80) Company Cases 656 and again in S.K. Real Estates and Another Vs. Ahmed Meeran 2002 (111) Company Cases 400 has consistently held that a sole proprietorship is neither a firm nor a company nor an association of individuals, under section 141 of the Act.

20. In contrast, in Aneeta Haada (supra), there existed a duly incorporated company whose cheque signed by its authorized signatory (Aneeta Haada), had been dishonored giving rise to the criminal complaint alleging commission of offence under Section 138 of the Act. The Supreme Court held, in the case of offence under Section 138 of the Act being committed by a company/juristic person, it would be imperative to first arraign the company (juristic person) as an accused person. The other category of offenders i.e. natural person/s may be arraigned only on the touchstone of vicarious liability.

21. That three judge decision of the Supreme Court is based on and follows the earlier three judge decision of that Court in St. of Madras Vs C.V. Parekh and anr. (1970) 3 SCC 491, the principle laid down and applied being, in the case of an offence being committed by a juristic person, the occasion to proceed against the person authorized by such person would arise only if the latter is first arraigned as an accused person and held guilty.

22. Plainly, there is no ratio laid down, that in case of a sole-proprietary concern, both the business concern and the sole proprietor would be liable to be prosecuted or be impleaded as accused person in the criminal complaint. To that extent, the decision of the learned single judge in Hitendra Kishan Lal Jain (supra), is not based on a correct reading of Aneeta Haada (supra).

23. The above principle enunciated in Aneeta Haada (supra) or C.V. Parekh (supra) has no bearing in the case of a sole-proprietary concern. Neither there exist two persons/accused, nor there exists any person other than the sole-proprietor whose actions may constitute ingredients of an offence under section 138 of the Act. He is the person engaged in the conduct of his business/'concern' and he is the person who issues/signs the cheque, whose dishonour is the primary ingredient of the offence.

24. While I would otherwise have been bound to refer the matter to the larger bench in view of my disagreement with Hitendra Kishan Lal Jain (supra), however, in view of further fact that the position in law stands clearly enunciated by authoritative pronouncements of the Supreme Court in the case of Ashok Transport Agency v. Awadhesh Kumar (supra) and Bhagwati Vanaspati Traders v. Supt. of Post Offices (supra) as followed and directly applied to section 141 of the Act in Raghu Lakshminarayanan v. Fine Tubes (supra), which decisions had not been placed and therefore not considered in Hitendra Kishan Lal Jain (supra), it appears that that decision of the learned single judge, is contrary to the binding law laid down by the Supreme Court. Also, it has been rendered per incuriam. Being bound by the law laid down by the Supreme Court, there is no requirement to refer the question to a larger bench of the Court.

25. Accordingly, there is no defect in the complaint lodged against the applicant, in his capacity as the sole proprietor of the concern M/s Manoj Rice Mill. There was no requirement to implead his sole proprietary concern as an accused person nor there was any need to additionally implead the applicant by his trade name.

26. The present application lacks merit and is accordingly dismissed.

Order Date :- 3.5.2019

S.Chaurasia