LexRAGHU LAKSHMINARAYANAN versus M/S. FINE TUBES
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"-j" - -> / RAGHU LAKSHMINARA YANAN. A v. MIS. FINE TUBES APRIL 5, 2007 [S.B. SINHA AND MARKANDEY KA TJU, JJ.] B 'I' Negotiable Instruments Act, 1881-ss.141 & 138: Dishonour of cheque issued by proprietorship firm-Complaint against c 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, 1908-0rder XtX Rules 1 and JO- D ...,· 7 Partnership firm and proprietorship firm-Distinction between-Re-iterated Respondent No. l 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 E presentation was dishonoured. Accused no.I was described· as a business concern. Appellant arrayed as accused no. 3 was described as In charge, Manager, Director of accused no. l. 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. F ·"' ./ Allowing the appeal, the Court HELD: l. 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 G 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 885 H " 886 SUPREME COURT REPORTS [2007) 4 S.C .. R. A No. 1 was described therein as 'a business co'ncern'. 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 B 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 C 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 D 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 Partne~hip Act. In view of the said description of"Director", other than a person who comes within the purview thereof, nobody else can be pr-osecuted 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 E 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 F 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 G 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 betw
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