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2022 (12) TMI 233 - HC - Indian LawsDishonor of Cheque - legally enforceable debt or not - rebuttal of presumption - issuance and signature on the cheque not disputed - liability of signatory of cheque - Instead of filing a complaint against the firm, the same has been filed against petitioner No.1- private limited company - deemed service of notice, once refused to accept - HELD THAT - A person who is the signatory to the cheque which is drawn by that person on an account maintained by him and the same has been issued for the discharge, in whole or in part, of any debt or other liability, which has been returned by the bank unpaid, such person can be said to have committed an offence. Pertinently, a reference to the dictum by Hon ble The Supreme Court of India, in the cases RANGAPPA VERSUS SRI MOHAN 2010 (5) TMI 391 - SUPREME COURT and TRIYAMBAK S. HEGDE VERSUS SRIPAD 2021 (9) TMI 1159 - SUPREME COURT is made, wherein it has been held that once issuance of a cheque and signature hereon are admitted, presumption as envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption. The presumptions raised under Section 118(b) and Section 139 of the Act are rebuttable. A reverse onus is cast on the accused, who has to establish a probable defence on the standard of preponderance of probabilities to prove that either there was no legally enforceable debtor other liability - cheques not having been drawn on the account of petitioner No.1- private limited company, which is a separate legal entity, the complaint qua it, is not maintainable. Liability in so far as petitioner No.2, sole proprietor - HELD THAT - In absence of the firm being not arrayed as an accused, is concerned, the exposition of law as settled by Hon'ble The Supreme Court in the case of RAGHU LAKSHMINARAYANAN VERSUS FINE TUBES 2007 (4) TMI 367 - SUPREME COURT , draws a clear distinction emerging therefrom that only the proprietor can be held liable under Section 138 of the Act, as the proprietorship concern has no separate legal identity, it means and includes sole proprietor and vice versa. Thus, a sole proprietorship firm would not fall within the ambit and scope of Section 141 of the Act, the proprietor and the firm being one and the same. The sine qua non for an offence under Section 138 of the Act is that the cheque must be drawn on an account maintained by the accused and admittedly, it is the case of the petitioners themselves that in the present case, cheques were drawn on the account of the proprietorship concern on the account on which the cheques in question were drawn on the account maintained by the sole proprietor of sole proprietorship firm- M/s Royal Pressing and Components, who signed the same - There is no denial that he is not the sole proprietor of the aforesaid firm or that he did not sign the cheques in question, the legal notice of demand was sent by registered AD post at the address as mentioned in Annexure P-5, which is the Central Excise registration certificate as appended and relied upon by the petitioners themselves and is the same address as that of petitioner No.2, mentioned in this petition and in the complaint, but was refused to be accepted by him, which as per Section 27 of the General Clause Act gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post, unless and until the contrary is proved by the addressee. It is the solemn duty of the Courts to separate the grain from the chaff. As per Section 142(1)(a) of the Act, the sole criteria being that the complaint must be filed by the payee or the holder of the cheque in due course, is duly satisfied in the present case - this Court is persuaded to hold that the complaint against petitioner no.2 is maintainable. The present petition is allowed in part. The complaint, Annexure P-1, and the summoning order 14.7.2016, Annexure P-3 are set aside only qua petitioner No.1. However, the complaint and impugned summoning order qua petitioner No.2 are maintained.
Issues Involved:
1. Whether the complaint under Section 138/141 of the Negotiable Instruments Act, 1881 is maintainable against the petitioners. 2. Whether the cheques issued by the proprietorship concern can lead to prosecution of the private limited company and its director. 3. The applicability of Section 141 of the Negotiable Instruments Act to proprietorship concerns. 4. The presumption of legally enforceable debt under Sections 118 and 139 of the Negotiable Instruments Act. 5. The impact of non-arraying the proprietorship firm as an accused on the maintainability of the complaint. Detailed Analysis: 1. Maintainability of the Complaint: The petitions sought quashing of a criminal complaint and summoning order under Section 138/141 of the Negotiable Instruments Act, 1881. The court noted that the cheques were drawn on the account of the proprietorship concern and not the private limited company. The petitioners argued that only the drawer of the cheque could be held liable, referencing several Supreme Court judgments. The court acknowledged that the cheques were issued by the proprietorship concern and signed by petitioner No.2 in his capacity as a sole proprietor, not as a director of the private limited company. 2. Liability of Private Limited Company and its Director: The court examined whether the private limited company and its director could be prosecuted for cheques issued by the proprietorship concern. It was established that the cheques were drawn on the account of the proprietorship firm, and the complaint was wrongly filed against the private limited company. The court referred to the HDFC bank certificate confirming the account closure of the proprietorship firm and noted that the cheques were issued after the account was closed, indicating ill-intention. 3. Applicability of Section 141 to Proprietorship Concerns: The court clarified that Section 141 of the Negotiable Instruments Act applies to companies and not to proprietorship concerns. It cited the Supreme Court's judgment in Raghu Lakshminarayanan vs. M/s. Fine Tubes, which held that a sole proprietorship firm has no separate legal identity and only the proprietor can be held liable under Section 138 of the Act. The court concluded that non-arraying the proprietorship firm as an accused does not impede proceeding against the sole proprietor. 4. Presumption of Legally Enforceable Debt: The court discussed the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, which presume that the cheque was issued for a legally enforceable debt. The burden of proof lies on the accused to rebut this presumption. The court cited several Supreme Court judgments, including Rangappa vs. Sri Mohan, which upheld these presumptions and the onus on the accused to establish a probable defense. 5. Non-arraying of Proprietorship Firm: The court held that the complaint against petitioner No.2, the sole proprietor, is maintainable even if the proprietorship firm is not arrayed as an accused. It distinguished the present case from other judgments where the drawer of the cheque was an individual and not a company. The court emphasized that the sole proprietorship and the proprietor are one and the same, and thus, the proprietor can be held liable under Section 138 of the Act. Conclusion: The court allowed the petition in part, setting aside the complaint and summoning order against petitioner No.1 (the private limited company) but maintaining them against petitioner No.2 (the sole proprietor). The court clarified that its observations were limited to the adjudication of the present petition and should not influence the trial court's decision on the merits of the case.
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