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CASE NO.: 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

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Criminal Procedure was dismissed stating;

"\005After 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\005."         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

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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

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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.