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MADRAS HIGH COURT
C. NAGAPPAN, J.
Crl. O.P. No. 25135 of 2000
Decided on 13.11.2001
S.K. REAL ESTATES, REP. BY ITS PROPRIETOR S.K. KRISHNAMOORTHY & ANR.
versus
S. AHMED MEERAN
Counsel for the Parties :
For the Petitioner:Mr. V. Krishanmoorthy, Advocate For the Respondent:Mr. S. Haja Mohideen Gisthi, Advocate.
A proprietary concern is not a legal entity and cannot be prosecuted under Section 141 of the Negotiable Instruments Act.
Headnote:
Negotiable Instruments Act - Quashing of Proceedings - Section 138 - 141 - Summary: The court discussed the applicability of Section 141 of the Negotiable Instruments Act to a proprietary concern and its proprietor. It relied on various precedents to establish that a proprietary concern is not a legal entity and the prosecution cannot be maintained against it. The proceedings against the proprietary concern were quashed while the prosecution against the proprietor was allowed to continue.
Fact of the Case:
The petitioners were accused in a case for an offence under Section 138 of the Negotiable Instruments Act. The first accused was a concern represented by its proprietor, and the second accused was the proprietor. The petitioners sought to quash the proceedings, arguing that the prosecution against the first petitioner, a proprietary concern, was not sustainable.
Finding of the Court:
The court found that the proprietary concern was not a legal entity and the prosecution against it could not be maintained. However, the prosecution against the proprietor was allowed to continue.
Issues: The main issue was the applicability of Section 141 of the Negotiable Instruments Act to a proprietary concern and its proprietor.
Ratio Decidendi: The court relied on precedents to establish that a proprietary concern is not a legal entity and cannot be prosecuted under Section 141 of the Negotiable Instruments Act.
Final Decision: The petition was dismissed as withdrawn with respect to the second petitioner and allowed with respect to the first petitioner. The proceedings against the first petitioner were quashed.
1. The petitioners are accused Nos. 1 and 2 respectively in C.C.No. 5890 of 1997 on the file of V-Metropolitan Magistrate, Egmore, Chennai and they pray for quashing the proceedings in the case.
2. The respondent has filed a private complaint against the petitioners arraying them as accused Nos. 1 and 2 for offence under Section 138, Negotiable Instruments Act. According to the respondent/ complainant, the first accused is a concern, represented by its proprietor S.K. Krishanmurthy and the second accused is S.K. Krishanmurthy and they entered into an agreement for sale with the complainant and he paid a sum of Rs.2,20,000/-. The transaction did not materialise and hence the first accused concern and its proprietor gave a cheque in favour of the complainant. On presentation, the cheque got dishonoured on 22.5.1997 with an endorsement "Funds insufficient". At the request of second accused, the cheque was represented on 3.6.1997 and 14.6.1997 and on both the occasions, the cheque got dishonoured for the same reason and thereafter the complainant issued a lawyer's notice, dated 25.6.1997, to the accused and it was received by the accused. No payment had been make even thereafter. Hence the complaint in filed.
3. Mr. V. Krishnamoorthy, learned Counsel for the petitioner, at the time of argument made an endorsement that he is withdrawing the petition as against the second petitioner and containing his argument in respect of first petitioner alone. He contended that the proprietary concern is not a legal entity apart from its proprietor the concern name being the name of the proprietor himself and hence the prosecution against the first petitioner is not sustainable and liable to be quashed. Per contra, the learned Counsel for the respondent contended that both the proprietary concern and the proprietor can be proceeded against and the prosecution against both can be sustained.
4. Section 141 of Negotiable Instrument Act deals with offences by companies and in the explanation it is stated that the company means any body corporate and includes a firm or other association of individual and director in relation to a firm means a partner in the firm. A proprietary concern is not a firm or company and hence Section 141 is not applicable. The proprietor is the person who does business but for trading convenience, business is done in the name of proprietary concern. Thus, proprietary concern is not an independent, legal and juristic entity having legal recognition in the eye of law and it can neither initiate proceedings nor proceedings be initiated against it. In case of proprietary concern, the proprietor is always an affected person, who can either indict or be indicted.
5. Mr. V. Krishnamoorthy, learned Counsel for the petitioner, mainly relied on the decision of this Court in M/s. Sri Sivaskthi Industries, rep. By its proprietor, Raman v. M/s. Arikant Metal Corporation. 1992 L.W. (Crl.) 347. In that case, the first accused was a concern represented by proprietor Raman and the second accused was Raman and they were proceeded against for an offence under Section 138 of N.I. Act. Pratap Singh, J. held that accused Nos. 1 and 2 are one and the same person and, as such, the proceedings as against the first accused, namely, M/s Sri Sivasakthi Industries, represented by its proprietor, Raman, are to be quashed and the complaint is maintainable as against the second accused. The facts of the above case and the present case are identical.
6. Mr.V. Krishnamoorthy, learned Counsel for the petitioner, drew my attention to some decisions on this point. In Raman v. Krishna Pharmaceutical Distributors, 111(1994) CCR 1601 Pratap Singh, J held that the proceedings against Sri Janaki Pharmacy, represented by proprietor, are liable to be quashed, since the proprietary concern is not a legal entity and A. Raman was the drawer of the cheque, who can be prosecuted.
7. In the decision of the Gujarat High Court in Satish Jayantilal Sha v. Pankaj Mashruw
