Karnataka High Court

Mr Raghav Hegde vs Sureshlal Hiralal Huf on 21 June, 2023

Bench: M.Nagaprasanna

                                                   -1-
                                                           NC: 2023:KHC:21485
                                                           CRL.P No. 7399 of 2020




                           IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                               DATED THIS THE 21ST DAY OF JUNE, 2023

                                                BEFORE
                             THE HON'BLE MR JUSTICE M.NAGAPRASANNA
                                CRIMINAL PETITION NO. 7399 OF 2020
                      BETWEEN:

                      1.    MR. RAGHAV HEGDE,
                            S/O. MR. NARASIMHA HEGDE,
                            AGED 47 YEARS,
                            RESIDING AT:
                            NO.57/1, 7TH MAIN,
                            4TH BLOCK, BSK III STAGE,
                            BANGALORE, KARNATAKA,
                            INDIA - 560 085.

                            FORMER AUTHORISED SIGNATORY OF
                            SIVAN AND COMPANY
                            23/2, COFFEE DAY SQUARE,
                            VITTAL MALLYA ROAD,
                            BANGALORE - 560 001.
                            KARNATAKA, INDIA.

                      2.    MR. DEEKSHITH MALLE GOWDA KODUVALLI,
Digitally signed by         S/O. LATE MALLE GOWDA K.S.,
PADMAVATHI B K              AGED ABOUT 49 YEARS,
Location: HIGH
COURT OF                    RESIDING AT:
KARNATAKA                   G-401, SLV SPLENDOUR,
                            HARINAGAR CROSS, KONANAKUNTE
                            AMRUTHNAGARA ROAD,
                            BANGALORE, KARNATAKA, INDIA.
                            FORMER AUTHORISED SIGNATORY OF
                            SIVAN AND COMPANY
                            23/2, COFFEE DAY SQUARE
                            VITTAL MALLYA ROAD,
                            BANGALORE - 560 001,
                            KARNATAKA, INDIA.

                      3.    SIVAN AND COMPANY,
                            A SOLE PROPRIETORSHIP FORMED
                                  -2-
                                       NC: 2023:KHC:21485
                                       CRL.P No. 7399 of 2020




    AND OWNED BY
    LATE V.G. SIDDHARTHA
    PRESENTLY NOT IN EXISTENCE
    PREVIOUSLY HAVING ITS OFFICES AT:
    AUTHORISED SIGNATORY OF
    SIVAN AND COMPANY
    23/2, COFFEE DAY SQUARE,
    VITTAL MALLYA ROAD,
    BANGALORE - 560 001,
    KARNATAKA, INDIA.
                                                ...PETITIONERS
(BY SRI. N.K. DILIP, ADVOCATE)

AND:

    SURESHLAL HIRALAL HUF,
    REPRESENTED BY ITS KARTA,
    MR. SURESHLAL HIRALAL,
    R/O NO.13, 1ST CROSS,
    RRMR EXTENSION, SHANTHINAGAR,
    BANGALORE (PIN - 560 024)
    AND ALSO AT
    NO.17, SUBRAMANYA SWAMY TEMPLE STREET,
    V.V. PURAM, BANGALORE (PIN - 560 004)
    REPRESENTED BY SPA HOLDER,
    KISHORE SURESHLAL,
    S/O. SURESHLAL HIRALAL,
    AGED ABOUT 43 YEARS.

                                                ...RESPONDENT
(BY SMT. LAKSHMI MENON, ADVOCATE)

       THIS CRL.P., IS FILED U/S.482 CR.P.C PRAYING TO QUASH
AND SET ASIDE THE COMPLAINT BEARING C.C.NO.2715/2020
DATED 07.02.2020 (ANNEXURE-A) FILED BEFORE THE LEARNED XX
A.C.M.M., COURT AT BENGALURU AND (ANNEXURE-H) AND ORDERS
PASSED BY THE LEARNED XX A.C.M.M., AT BENGALURU

       THIS CRL.P., COMING ON FOR ADMISSION, THIS DAY, THE
COURT MADE THE FOLLOWING:
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                                         NC: 2023:KHC:21485
                                           CRL.P No. 7399 of 2020




                               ORDER

The petitioners are before this Court calling in question

proceedings in C.C.No.2715/2020 registered for the offence

punishable under Section 138 of the Negotiable Instrument Act,

1881 (hereinafter referred to as 'Act' for short).

2. Heard Sri. N.K.Dilip, learned counsel appearing for

the petitioners and Smt. Lakshmi Menon, learned counsel

appearing for the respondent.

3. Facts in brief germane are as follows:

One Sivan and Company, a sole proprietorship of one Sri.

V.G.Siddartha, was engaged in the business of trading of

shares. It transpires that the respondent / complainant and

the sole proprietor had transactions amongst themselves and

the transactions leads to issuance of certain cheques by the

said sole proprietor in favour of the respondent. Two of such

cheques were honoured, and the other three of the cheques

were kept to be presented. In the interregnum, the sole

proprietor dies. On the death of the sole proprietor, the

cheques that were presented and dishonoured were sought to

be proceeded against by registering a crime against the

petitioners. The concerned Court takes cognizance of the

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offence and issues summons to the petitioners, it is then the

petitioners knock at the doors of this Court in the subject

petition.

4. Learned counsel appearing for the petitioners would

contend that the signatory to the cheque was a sole proprietor

of the aforesaid firm, and on his death, the liability would not

move upon the legal heirs of such sole proprietor. He would

seek to place reliance upon several judgments of the Apex

Court to contend that the proceedings should not be permitted

to continue.

5. Learned counsel appearing for the respondent /

complainant, though admitting the position in law, would

however contend that they be reserved with a right to initiate

proceedings in accordance with law seeking recovery of the

amount. The proceedings under the negotiable instruments

acts may have to be closed, but other avenues should not be

closed by this order. He would further contend that the

chartered accountant certificate that the petitioners seek to

place reliance upon is issued by the Corporation Bank, and

therefore, much credence should not be laid on that.

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6. I have given my anxious consideration to the

submissions made by the respective learned counsel and have

perused the available material on record.

7. The afore-narrated facts are not in dispute, and the

issue lies in a narrow compass. It is admitted that Sivan and

Company was a proprietorship concern and cheques had been

issued by the late V.G.Siddartha. The two cheques were

presented during his life time which were honoured, three of

the cheques which were presented after his death were

dishonoured, and that leads to the registration of the crime

against the petitioners. The Apex Court in the case of Raghu

Lakshminarayan V/s. Fine Tubes reported in (2007)5 SCC 103,

considering an identical issues, holds as follows:

6. The learned Chief Metropolitan Magistrate issued summons on the other accused persons relying on the basis of the averments made in the said complaint petition fled 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 Metropolitan Magistrate found that prima facie case was made out against all the accused persons and, therefore, summoned these accused. Challenging these summoning orders Accused 3 has filed this petition under Section 482 CrPC. It is inter alia, contended that he was never the Director of the said Accused 1; cheque in question was not signed by him and that he was not responsible for the conduct of business of Accused 1. It is the case of the petitioner that he was an employee of Accused 1. In support, appointment letter

NC: 2023:KHC:21485 CRL.P No. 7399 of 2020

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 Accused

1. I find that there were specific averments made in the complaint that the petitioner in that capacity was dealing with the complainant and was handling day-to-day affairs of Accused 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 CrPC...."

7. A bare perusal of the complaint petition would show that Accused 1 was described therein as "a business concern". It was not described as a company or a partnership firm or an association of persons.

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.

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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. The appellant herein categorically contended that Accused 1 was a proprietary concern of Accused 2 and he was merely an employee thereof.

12. If Accused 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. The 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 Accused 1, as a business concern. Significantly, the 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 Accused

1. A person ordinarily cannot serve both in the capacity of a Manager and a Director of a company.

13. The distinction between partnership firm and a proprietary concern is well known. It is evident from Order 30 Rule 1 and Order 30 Rule 10 of the Code of Civil Procedure. The question came up for consideration also before this Court in Ashok Transport Agency v. Awadhesh Kumar wherein this Court stated the law in the following terms: (SCC pp. 569-70, para 6) "6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Partnership Act, 1932. Though a partnership is not a juristic person but Order 30 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 30 which make applicable the provisions of Order 30 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

NC: 2023:KHC:21485 CRL.P No. 7399 of 2020

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 30 have no application to such a suit as by virtue of Order 30 Rule 10 the other provisions of Order 30 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 30 can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case."

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.

15. A Constitution Bench of this Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla 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 the company vicariously liable therefor. (See also Sabitha Ramamurthy v. R.B.S. Channabasavaradhya and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla)

16. 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.

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

8. In the light of the facts in the case at hand being as

aforesaid and the Apex Court rendering its finding on identical

circumstances would lead to the obliteration of the crime

against the petitioners, which would however not preclude the

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complainant to initiate any proceedings in accordance with

law.

9. For the aforesaid reasons, the following:

ORDER

1) Criminal petition is allowed.

2) Proceedings in C.C.No.2715/2020 dated 07.02.2020

on the file XX Additional Chief Metropolitan

Magistrate, Bengaluru registered for the offence

punishable under Section 138 of the Negotiable

Instrument Act, 1881 stands quashed.