Proprietor of accused firm sought quashing of Section 138 NI Act proceedings on the ground that cheques were issued by another accused and no specific allegations were made against her. The Court held a sole proprietor is deemed responsible for the firm's business under Section 141 and dismissed the petition.
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2ND DAY OF FEBRUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM CRIMINAL PETITION NO. 2068 OF 2018 (482)
BETWEEN:
…PETITIONER
(BY SRI R B DESHPANDE, ADVOCATE)
AND:
…RESPONDENT
(BY SRI K PRASANNA SHETTY, ADVOCATE)
THIS CRL.P IS FILED U/S 482 CR.P.C PRAYING TO QUASH THE CRIMINAL PROCEEDINGS AGAINST THE PETITIONER IN C.C.NO.68/2018 (PCR NO.971/2017) PENDING
ON THE FILE OF THE III ADDITIONAL CIVIL JUDGE AND JMFC, UDUPI. THIS CRL.P COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
the amount covered under the cheques and therefore, the respondent -complainant lodged the said complaint.
NC: 2024:KHC:4606 CRL.P No. 2068 of 2018
“141. Offences by companies.—(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
(2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.
Explanation.—For the purposes of this section, —
(a) “company” means any body corporate and includes a firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.”
Sub-section (1) of Section 141 postulates that where an offence is committed under Section 138 by a company, the company as well as every person who, at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business shall be deemed to be guilty of the offence. Though there are no specific allegations against the petitioner, the petitioner being the sole proprietor was responsible for the for the conduct of the business.
“4. I am afraid that the learned magistrate misunderstood the provisions contemplated under section 141. It is only in the case of a firm, whether it is a partnership firm or a company, the averments have to be necessarily stated as to, whether the accused was in charge of the conduct of the business.
But in a case of proprietrix concern, such an averment is not at all necessary. The pro-prietrix is the person, who is responsible for the business. Though it may in terms contain the name concern, firm and other things, when it is a proprietrix concern, the one and only person, who is liable is the proprietrix. Though the cheque is signed by power of attorney on behalf of the respondent herein, the cheque discloses that he had signed only in the capacity as a power of attorney and hence, in such circumstances, the learned magistrate, has erred in dropping the proceedings against the respondent.”
(Emphasis supplied)
Therefore the petitioner having admitted that she is the proprietor and the accused no.3 was an authorized signatory of accused no.1 cannot solely on the basis that no specific allegations are made out against her seek to quash the proceedings. Upon careful examination of the complaint, it becomes apparent that the complainant has referred to the accused in the plural form, implying that all accused individuals, including the petitioner, are collectively implicated. Consequently, the petitioner cannot insist that specific allegations against her individually are necessary, given the comprehensive nature of the accusations encompassing all accused parties. The apex court has time and again in plethora of judgments observed that the power of the high court to quash
criminal proceedings have to be used sparingly, with circumspection and in the rarest of rare cases.
Sd/JUDGE
BKV List No.: 1 Sl No.: 8
2 issues framed by the court
Can a sole proprietor who did not personally draw the cheques seek quashing of Section 138 proceedings for want of specific allegations against her?
Does Section 141 NI Act liability attach to a sole proprietor of the accused firm despite absence of individual averments?
Colour shows how this judgement treated each authority
Statex Mills v. C.N.P. RukmaniRelied on¶9
2003 SCC OnLine Mad 884 : (2003) 117 Comp Cas 280 · Who else cites this
4 provisions across 2 enactments
Smt. Sunitha S Kamath
Ekadatha Oil and Flour Mills represented by its proprietor Yogesh Nayak
Sachin Shankar Magadum
As recorded by the court registry
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