2022 (2) TMI 610 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - discharge of legally enforceable debt and lawful liability or not - existence of vicarious liability or not - Section 138 of NI Act and Section 141 of the NI Act - HELD THAT - The complaint was filed by the 2nd respondent showing the accused as proprietors/partners of M/s.Ayyappa Traders under Section 138 read with 142 of NI Act. With regard to the 2nd petitioner, he was shown as partner of M/s.Ayyappa Traders. It was not mentioned whether the 3rd petitioner was a firm or proprietary concern and what was the status of the 1st petitioner A1, whether he was a proprietor or partner. The cheques were alleged to be issued by A1 on behalf of the firm as per the complaint. But the copy of the cheques filed would disclose that they were signed by A1 as the proprietor for Ayyappa Traders. The petitioners filed the income tax returns of the 1st petitioner for the assessment year 2011-12 wherein he was shown as the Proprietor of Ayyappa Traders - The 2nd respondent - complainant failed to file any documentary evidence to show that the 3rd petitioner was a partnership firm. As the person who issued the cheque was the Sole Proprietor of M/s.Ayyappa Traders, he alone was liable for dishonour of cheque under Section 138 of NI Act. As the provisions of Section 141 of the NI 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, the 3rd petitioner M/s.Ayyappa Traders also need not be shown as an accused. In the case of a sole proprietary concern, there are no two persons in existence. Therefore, no vicarious liability would arise on any other person. As such, the complaint filed by the 2nd respondent was not maintainable against the petitioners No.2 and 3. However, as the 1st petitioner is liable for dishonour of the cheques issued by him, the petition is partly allowed quashing the proceedings against the petitioners 2 and 3 and permitted to be allowed to continue against the petitioner No.1 in the capacity of the Proprietor of M/s.Ayyappa Traders. The Criminal Petition is partly allowed.

Summary

Issues:
Petition to quash proceedings under Section 482 Cr.P.C. in CC No.236 of 2012 regarding dishonored cheques.

Analysis:
1. The petitioners, accused Nos.1 to 3, sought to quash proceedings initiated by the de facto complainant alleging dishonor of cheques issued by the petitioners' firm.

2. The complainant alleged supplying food products worth ?1,02,060 to the petitioners' firm, who issued two cheques that were dishonored due to insufficient funds, leading to legal action under Sections 138 and 142 of the NI Act.

3. The petitioners argued that the 2nd petitioner was not a partner in the firm mentioned by the complainant, and the legal notice was not maintainable, urging to dismiss the complaint.

4. The complainant contended that the cheques were issued to discharge a debt, and the dishonor showed the accused's intention to evade payment, emphasizing the legal liability under Section 138 NI Act.

5. The court observed discrepancies in the complaint regarding the status of the petitioners and the firm, concluding that only the 1st petitioner, as the sole proprietor, was liable for the dishonored cheques, dismissing the case against petitioners 2 and 3.

6. As per Section 141 of the NI Act, vicarious liability doesn't apply to sole proprietorship concerns; hence, the complaint against petitioners 2 and 3 was deemed not maintainable, allowing the proceedings to continue against the 1st petitioner.

7. Consequently, the court partly allowed the petition, quashing proceedings against petitioners 2 and 3, and permitted the case to proceed against the 1st petitioner in the capacity of the Proprietor of the firm.

In conclusion, the court's judgment clarified the liability of the petitioners in a case involving dishonored cheques, distinguishing the roles of the accused in a sole proprietorship concern and dismissing vicarious liability in such cases.