RAGHU LAKSHMINARAYANAN Vs. M/S. FINE TUBES  INSC 368 (5 April 2007)
S.B. Sinha & Markandey Katju
CRIMINAL APPEAL NO. 485 2007 [Arising out of S.L.P. (Crl.) No. 4211 of 2006]
S.B. SINHA, J.
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
The status of the accused No. 1 was not disclosed in the array of the
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
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 Criminal Procedure was
"After 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."
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
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
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
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
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
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.