Only the proprietor of a proprietorship firm can be held liable under Section 138 of the NI Act; mere representation does not establish liability.

JUDGMENT

HON’BLE MS. JUSTICE SHALINDER KAUR

1. The present Criminal Appeal under Section 378 of the Code of Criminal Procedure, 1973 (Cr.P.C.) has been filed by the Appellant, assailing the Judgment dated 24.09.2011 (“Impugned Order”), passed by the learned Metropolitan Magistrate, Karkardooma Courts, Delhi, in Complaint Case No. 401/2004, titled “M/s Noida Dhatu Pvt. Ltd. vs. M/s Udai Continentals & Anr”, whereby the Respondent No.2 has been acquitted of the offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”).

2. Before proceeding to the submissions addressed on behalf of the parties, it would be relevant to set out the factual matrix, which has led to the filing of the present Criminal Appeal.

Factual Background

3. The Appellant, M/s. Noida Dhatu Pvt. Ltd., a company registered under the Companies Act, 1956, is engaged in the business of manufacturing of Acoustic Enclosures (Canopy) and Genset Control Panels. The Respondent No.1, M/s Udai Continentals, a proprietorship concern, is engaged in the business of trading of Diesel Generating Sets, under the Proprietorship of Mr. D.P. Singh, who has been arrayed as Respondent No. 2.

4. It is the case of the Appellant that the Appellant and Respondent No. 2 had entered into business transaction wherein an order for supply of canopies was placed by Respondent No.1 with the Appellant. Accordingly, the goods conforming to the agreed specifications were duly supplied by the Appellant to Respondent No.1. The Respondent No. 2 issued an advance cheque bearing No. 040164, dated 12.11.2003 in the sum of Rs.1,10,000/-, drawn on ICICI Bank, Kanpur Branch to the Appellant. Consequent thereto, the Appellant presented the afore-noted cheque for encashment through its banker, however, the same was returned dishonored.

5. Upon being informed of the dishonor of the said cheque, the Appellant claims to have approached Respondent No.2, who, while requesting that no legal proceedings be initiated, cited financial constraints and assured the Appellant, that the outstanding amount would be discharged in two installments, first, by way of a Cheque bearing No. 040167 dated 18.11.2003 for an amount of Rs. 50,000/-, and second, by way of a post-dated Cheque bearing No. 040166 dated 15.12.2003 in the sum of Rs. 60,000/-, both drawn on ICICI Bank, Kanpur Branch.

6. The Appellant presented the Cheque bearing No. 040166 dated 15.12.2003 for encashment, however, the same was returned unpaid with the endorsement “funds insufficient.”

7. The Respondent No.2 once again assured the Appellant that upon completion of modification work of canopies, sufficient funds would be arranged for the payment of the goods supplied. Thus, the cheque no. 040166 dated 15.12.2003 for Rs. 60,000/- was again presented in the bank for encashment on 21.05.2004 for realization of money, however, the same was again returned unpaid vide Cheque Return Memo dated 21.05.2004 with the remarks “payment stopped by drawer”.

8. Upon completion of the said work, the Appellant discovered that a total sum of Rs.62,200/- was pending from the Respondents, including the interest at the rate of 18%. Consequently, a Legal Demand Notice dated 02.06.2004 was issued by the Appellant, calling upon the Respondents to make the payment of the arrears within a period of 15 days.

9. Pursuant to the Respondents’ failure to make the payment, the Appellant filed a Complaint under Sections 138/141 of the NI Act, along with Sections 420 /406 of the Indian Penal Code, 1860 ( IPC ) before the learned Trial Court.

10. The learned Trial Court, vide the Order dated 20.07.2004, took cognizanc