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2021 (1) TMI 65 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - legally enforceable debt or not - validity of cheque issued by a proprietorship firm or by respondent - neither any statutory notice was issued to the proprietorship firm nor the said firm has been arraigned as an accused - rejection of application for amendment of complaint on the ground that not only the application has been filed belatedly, but it would also change the nature of the complaint - HELD THAT - The application for amendment was filed prior to cross-examination of complainant, although charge was already framed. Further, in the statutory notice Ex. P3, it was the stand of the appellant, that an amount of ₹ 3 lac was due as the respondent had got the advertisement of his shop. Thus, this Court is of the considered opinion, that the Trial Court, committed material illegality by rejecting the application filed by the appellant for amendment of the complaint and accordingly, the order dated 8-10-2012 passed by the Trial Court is hereby set aside, and the amendment in the complaint is allowed. Whether the cheque was issued by a proprietorship firm or by respondent, and whether the complaint filed against the respondent is maintainable or not? - HELD THAT - It is the case of the appellant, that the advertisement of the shop was got done through the appellant, therefore, a cheque of ₹ 3 lac was given. It is clear from disputed cheque Ex. P.1, that the cheque was issued by the respondent in the capacity of proprietor of Prapti Collection - Undisputedly, the cheque was issued by the proprietorship firm, however, neither the statutory notice was sent to the proprietorship firm nor has been arraigned as an accused. Whether the complaint filed by the appellant against the respondent alone was maintainable, because undisputedly, neither any statutory notice was issued to the proprietorship firm nor the said firm has been arraigned as an accused? - HELD THAT - A proprietorship firm is neither a Company, nor a partnership firm. It is merely a business name. Although even a partnership firm is not a juristic person, but in view of Order 30 Rule 1 CPC, the partners can sue or be sued in the name of firm. A suit by a proprietorship firm is only by its proprietor. Therefore, Section 141 of Negotiable Instruments Act, would not apply. Thus, the respondent alone can be prosecuted being the proprietor of the proprietorship firm. Accordingly, it is held, that the Trial Court, committed mistake by holding that since, the proprietorship firm was not arraigned as an accused, therefore, the complaint is not maintainable. W hether the complaint filed by the proprietorship firm is maintainable or not? - HELD THAT - The disputed cheque, Ex. P.1 was issued in favor of the appellant. Thus, the complainant is the payee - Thus, it is held that the complaint filed by the appellant against the respondent is maintainable. Legally enforceable debt or not - HELD THAT - It is the case of the appellant, that the respondent had given a contract for advertisment of his shop and accordingly, hoardings and pamphlets on the body as well as seats of a bus were affixed. The photographs Ex P8 and P.9 have been filed by the appellant. The respondent has also admitted that the photographs contain his number and photo of the shop. He also admitted that he never made any complaint with regard to the advertisement. The bills Ex. P.10 and P.11 have also been produced by the appellant. Further, the respondent has taken a false stand that the cheques were stolen from his drawer. Under these circumstances, it is held that the respondent had issued the cheque in discharge of legally enforceable debt. Insufficiency of funds - HELD THAT - It is not the case of the respondent that he had sufficient funds in his account. So far as the drawer's signature incomplete is concerned, it is not the case of the respondent that the disputed cheque Ex.P1 does not bear his signature. So far as the stand of the respondent that since the return memo Ex.P2 issued by ICICI Bank does not bear the seal of the Bank and, therefore, the same cannot be relied upon is concerned, the said submission of the counsel for the respondent cannot be accepted. The return memo Ex. P2 bears signature of an officer of ICICI Bank. The respondent has examined Ajay Jadaon (DW2), an employee of ICICI Bank, who did not try to prove that the return memo Ex.P2 was never issued by the Bank. Thus, this Court is of the considered opinion, that the appellant has successfully established that the disputed cheque, Ex. P.1 was issued by the respondent in discharge of his legally enforceable debt, which stood bounced due to in-sufficient funds. Accordingly, the judgment dated 13/10/2017 passed by Additional Chief Judicial Magistrate, Gwalior in Criminal Case No.14094/2010 is hereby set aside and the respondent is hereby convicted under Section 138 of Negotiable Instruments Act. Question of sentence - HELD THAT - As per Section 138 of Negotiable Instruments Act, the imprisonment for a term which may extend to 2 years and fine which may extend twice the amount of the cheque can be imposed. However, as this Court is not intending to impose jail sentence of more than 1 year, therefore, in the light of Section 143 of Negotiable Instruments Act, it is not necessary to hear the respondent on the question of sentence. Considering the totality of the facts and circumstances of the case, the respondent is awarded jail sentence of rigorous imprisonment of 1 year and is also directed to pay compensation of ₹ 5 lacs which shall be payable to the appellant - tcompensation amount be deposited within a period of one month from today, failing which the respondent shall undergo the jail sentence of 3 months - respondent is directed to surrender before the Trial Court, on or before 31st of December 2020. Appeal allowed.
Issues Involved:
1. Amendment of the complaint. 2. Issuance of the cheque by the respondent or the proprietorship firm. 3. Maintainability of the complaint against the respondent alone. 4. Legally enforceable debt and the respondent's defense. 5. Proof of return memo issued by the bank. 6. Conviction and sentencing under Section 138 of the Negotiable Instruments Act. Issue-wise Detailed Analysis: 1. Amendment of the Complaint: The appellant filed an application for amendment of the complaint to correct the reason for the payment, which was initially stated as a loan for domestic expenses but was actually for advertisement services. The Trial Court rejected this application, citing the delay and potential change in the nature of the complaint. The High Court found that this rejection was a material illegality as the amendment was sought before the cross-examination of the complainant, and the statutory notice already mentioned the correct reason for the payment. The High Court allowed the amendment. 2. Issuance of the Cheque by the Respondent or the Proprietorship Firm: The cheque in question was issued by the respondent in the capacity of the proprietor of Prapti Collection. The High Court clarified that a proprietorship firm is not a separate legal entity from its proprietor, and thus, the respondent alone can be prosecuted for the cheque issued by the firm. 3. Maintainability of the Complaint Against the Respondent Alone: The High Court referred to the Supreme Court's ruling in Raghu Lakshminarayanan v. Fine Tubes, which distinguished between a partnership firm and a proprietorship concern. It was held that the respondent, as the proprietor, is solely responsible and can be prosecuted without the firm being arraigned as an accused. The complaint filed by the appellant against the respondent was deemed maintainable. 4. Legally Enforceable Debt and the Respondent's Defense: The appellant provided evidence, including photographs and bills, to support the claim that the cheque was issued for advertisement services. The respondent's defense that the cheques were stolen from his drawer was not accepted due to lack of evidence and failure to lodge a police report. The High Court upheld the presumption under Section 139 of the Negotiable Instruments Act that the cheque was issued in discharge of a legally enforceable debt. 5. Proof of Return Memo Issued by the Bank: The return memo indicated the cheque was dishonored due to insufficient funds and incomplete signatures. The respondent did not dispute his signature on the cheque. The High Court found that the return memo, even without a bank seal, was valid as it bore the signature of a bank officer and was not contested by the respondent's witness from the bank. 6. Conviction and Sentencing Under Section 138 of the Negotiable Instruments Act: The High Court set aside the Trial Court's judgment, convicting the respondent under Section 138 of the Negotiable Instruments Act. The respondent was sentenced to one year of rigorous imprisonment and directed to pay compensation of ?5 lakhs to the appellant. Failure to pay the compensation within one month would result in an additional three months of imprisonment. The respondent was ordered to surrender before the Trial Court by 31st December 2020. Conclusion: The appeal was allowed, and the respondent was convicted and sentenced for the dishonor of the cheque issued in discharge of a legally enforceable debt.
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