S.141 NI Act | Sole Proprietor Alone Can't Be Sued For Offence U/S 138, Sole Proprietary Concern Must Also Be Arrayed As Accused: P&H High Court

The Punjab and Haryana High Court recently held that when a cheque issued by a sole proprietary entity is dishonoured, it is necessary to array the proprietary concern as an accused, along with the sole proprietor.

The bench comprising Justice Sureshwar Thakur further added that besides made it clear that merely suing the sole proprietor would not be sufficient, in view of Section 141 of the Negotiable Instruments Act.

The provision provides procedure in case of offences committed by companies. The bench observed that the provision not only covers body corporates but also includes firms and "other association of individuals". It observed, 

When the statutory signification assigned to a 'Company', does visibly cover not only any corporate body, but also covers a firm, or other association of individuals, therefore, not only a corporate entity either private, or, public limited becomes a 'Company', for the purpose of application thereons of Section 141 of 'the Act', but also a firm, or, other association of individuals, do also, become covered by Section 141 of 'the Act', besides a partner in a firm when is given the colour of a Director of a firm, also does become covered for the relevant purpose.

The court was dealing with a case where a cheque of Rs. 5,50,000/- was issued by the accused petitioner to the respondent-complainant towards purported discharge of legal liabilities. The cheque was dishonoured and an apposite statutory notice was served upon the petitioner followed by a complaint before the Trial Court.

The accused petitioner had challenged in the instant proceedings, the summoning order issued by the Trial Court.

The Court observed that even the sole proprietary entity becomes 'a person' committing an offence under Section 138.

Therefore, not only the juristic entity concerned, was amenable for being arrayed as an accused in the petition complaint, but also all those persons responsible to the sole proprietary concern, for the conduct of its business were also required to be arrayed as accused in the memo of parties of the petition complaint. However, a close reading of the above memo of parties, appertaining to the extant complaint, reveals that the sole proprietary concern, inasmuch as, M/s Thind Traders has not been arrayed as an accused, but only its sole proprietor Sardar Bhupinder Singh has been arrayed as an accused.

Consequently, it held that when the arraigning of the sole proprietary was a condition precedent for making the complaint well constituted, as it becomes the principal offender, the absence of its impleadment cannot make the instant complaint well constituted, nor, any valid prosecution can in its absence, be drawn, even against the accused petitioner, who can be assigned only a vicarious liability along with it the court added.

Accordingly, finding merit in the instant petition, the court allowed the same.

Case Title: Sardar Bhupendar Singh v. MS Green Feeds through its partner Vipin Kumar

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