An authorized signatory of a proprietary concern is liable under Section 138 for cheque dishonor, equating them with the drawer.

ORDER

This Criminal Original Petition has been filed praying to call for the records in C.C.No.2951/2019 pending on the file of the learned Metropolitan Magistrate, Fast Track Court No.III, Saidapet, Chennai, quash all further proceedings as against him in the said case in C.C.No.2951/2019.

2.The petitioner is the second accused in the private complaint laid under Section 138 of Negotiable Instruments Act, 1881. He prays to quash the complaint against him on the ground that the subject cheque is issued from the account maintained by M/s Jaandar Apparels, a Proprietorix concern owned by the first accused Mrs.Thilagavathy. He is the authorised signatory of the Proprietorix concern to sign cheques, but he is not the drawer of the cheque on the account maintained by him. Therefore, for dishonour of the subject cheque, he cannot be criminally held liable to be prosecuted under Section 138 of the Negotiable Instruments Act 1881.

3.The learned counsel for the petitioner/accused submitted that, Section 138 of the Negotiable Instruments Act, 1881 holds responsible only the person, who draws the cheque on an account maintained by him. Section 7 of the Negotiable Instruments Act, 1881 defines, who is a Drawer. In case of a bank account in the name of the Proprietor concern, only the proprietor is liable and not the mandate holder or the authorised signatory be liable for the dishonour of the said cheque. Unlike ‘company’ defined in Section 141 of the Negotaiable Instruments Act, a ‘Proprietor concern’ is not owned by collection of persons but owned by individual. Therefore, the principle of vicarious liability will not apply. The said individual, who owns the Proprietor concern alone is liable to be prosecuted, since he/she alone maintains the account and not the authorised signatory. 4

4.To buttress his submission, the learned counsel for the petitioner rely upon the judgment of this Court rendered in N.Gopalan –vs-

K.Udayakumar reported in [2009(4) CTC 217].

5.The Learned Counsel for the respondent/defacto complainant in contra submitted that, the petitioner is the person, who has drawn the cheque in the capacity as the authorised signatory of the Proprietor concern “Jaanthar Apparels”. The cheque was issued to discharge the debt of the proprietor concern. The proprietor of the concern ‘Jaanthar Apparels’ is the first accused Thilagavathy, who is none else than the wife of this petitioner. The petitioner is arrayed as an accused not vicariously but for issuing a cheque without sufficient fund in the account which he is maintaining as authorised signatory. Under Banking Law, the account holder need not necessarily be the person, who is authorised to maintain. Whether it is Company or Partnership firm or Proprietorship concern, bank permits persons to represent those entities on due authorisation or mandate.

6.Having signed the cheque in the capacity as the authorised signatory of the account holder, the petitioner becomes the drawer of the cheque. The authorisation given by the proprietor and the permission given by the Bank to the petitioner indicates that he is the person maintaining the account. Except the petitioner none else can maintain the account of the Proprietor concern, in view of the authorisation. The judgment relied on is different factual matrix and not applicable to the facts of the case in hand.

7.Heard the learned counsel appearing for the petitioner and the learned counsel appearing for the respondent.

8.Before adverting to the legal issues, the facts leading to the filing of the complaint is extracted below:-

The first