CASE NO.:

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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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