Crl.R.C. No.1362 of 2000

16th September, 2004

Petitioner Counsel: AMBADIPUDI SATYANARAYANA
Respondent Counsel: K. RAJI REDDY

Cases Cited:
Satish Jayantilal Shah Vs. Pankaj Mashruwala, 1996 Crl. LJ 3099 [Para 10]
S.K. Real Estates Vs. S. Ahmed Meeran, II(2002) CCR 421 [Para 12]
Vaidyanathan Vs. M/s. Dodla Dairy Ltd., 1999-1 L.W. (Cri.) 395 [Para 12]
P. Muthuraman Vs. M/s. Shree Padmavathi Finance (Regd.), I(1994) BC 165 [Para 14]
Raman Vs. Krishna Pharmaceutical Distributors, III (1994) CCR 1601 [Para 16]
B. Adarsh Rao Vs. M/s. Tamil Nadu Electricals rep. By its Manager, 1998(3) Cri 337 [Para 18]

JUDGMENT

JUDGMENT :- M/s. KVR Enterprises, Proprietor K. Subramanyam, resident of Katuru of Krishna District preferred the present criminal revision case under Sessions 397 and 401 of the Code of Criminal Procedure, 1973 ('Cr.P.C.' for short) against the judgment made in Criminal Appeal No.158 of 1998 dated 13-12-2000 on the file of Metropolitan Sessions Judge whereunder the conviction recorded under Section 138 of the Negotiable Instruments Act, 1881 (for short, 'N.I. Act') and sentence against the accused/petitioner to undergo rigorous imprisonment for a period of one year and to pay a fine of Rs.20,000/-, in default, to undergo simple imprisonment for a period of three months made in C.C.No.242 of 1995 on the file of VIII Metropolitan Magistrate dated 29-10-1998 is confirmed.

2. The brief facts that are necessary for the disposal of the present criminal revision case may be stated as follows :

3. The complainant company is doing business at Vijayawada in cement whereas the accused is a Cement Retail Dealer doing cement business at Eluru. The accused opened a Khata in the complainant's branch office at Vijayawada and purchased cement on credit basis from time to time and he was liable to pay a sum of Rs.3,58,251-50ps. towards principal amount as per the katha copy. The accused gave a cheque bearing No.089993 dated 28-1-1993 for Rs.3,37,736/- drawn on Andhra Bank, Vuyyuru towards part payment, stating that it would be honoured as soon as it is presented to the bank. Believing the same, the complainant presented the same for collection in the bank but the cheque was returned to the complainant on 3-2-1993 with an endorsement "funds insufficient". The allegation of the complainant is that the accused with a dishonest intention gave the aforesaid cheque and therefore the complainant got issued a statutory legal notice on 15-2-1993 intimating the fact of dishonour of the cheque and demanded the accused to pay katha debt within 15 days from the date of receipt of notice. The accused, having received the notice on 19.2.1993, failed to pay the amount covered by the cheque. Therefore, the accused committed an offence punishable under Section 138 of the N.I. Act.

4. To substantiate the case of the complainant, 4 witnesses were examined and 14 documents were marked. On behalf of the accused, the accused himself got examined as DW-1 and got marked Ex.D-1. The Trial Court accepted the evidence of the complainant and came to the conclusion that the accused committed an offence punishable under Section 138 of the N.I. Act and accordingly convicted and sentenced the accused as aforesaid.

5. Learned Counsel for the petitioner - accused contended that the complaint against KVR Enterprises as such is not maintainable as the proprietary concern is not a legal entity or juristic person; that none of the Directors or the Managing Director of the complainant company signed on the complaint; that there was no proper authorization and that the Magistrate has no jurisdiction to impose a fine of Rs.20,000/-. Therefore, he prays to set aside the conviction and sentence recorded against the petitioner - accused. In support of his contention, the learned Counsel also relied upon some decisions stating that the complaint cannot be maintained as the proprietary concern has no legal entity.

6. On the other hand, learned Counsel for the Respondent No.1 contended that on proper authorization by the complainant company it was signed by PW 1. As PW-1 left the office, PW-4 herein was duly authorised to appear in the case on behalf of the complainant and therefore though the complainant company cannot file the complaint, somebody who is an authorized person can file the complaint and it need not necessarily be signed by one of the Directors or the Managing Director. He also contended that both proprietorship and proprietor are one and the same and both things convey the same meaning and therefore the decisions relied upon by the learned Counsel for the petitioner have no bearing on the present case inasmuch as in all the cases the individuals were made as parties. He further contended that though the Magistrate has no power to impose fine exceeding Rs.5,000/-, the Magistrate has got power to impose compensation as provided under Section 357 Cr.P.C. Therefore, he prays to dismiss the criminal revision case as devoid of merits.

7. The facts of the case are in narrow compass. Two legal aspects have been raised by the learned Counsel for the petitioner Sri Ambadipudi Satyanarayana. The issuance of cheque is not denied or disputed by the learned Counsel for the petitioner. It is not in dispute that the complainant company is registered under the Companies Act. The evidence of PW-4 would go to show that as per Ex.P-2 statement the outstanding amount due by the accused to the company is Rs.3,58,251/-. To discharge the above amount, the accused issued Ex.P-3 cheque bearing No.089993 dated 28.1.1993. When the cheque was presented in the bank, it was returned as per Ex.P-4 Memo as insufficient funds whereupon PW-4 got issued a statutory legal notice calling upon the accused to pay the amount. Under Ex.P-7 acknowledgment, the accused received the same. The accused did not give any reply nor pay the amount. The fact that Ex.P-3 cheque was given to the complainant is not specifically denied or disputed. Therefore, the burden is on him to show that Ex.P-3 was not issued for legally enforceable debt.

8. Coming to the authorization, PW-4 specifically stated that under Ex.P-10 and P-8 the Madras Cements Limited by its President R. Natarajan authorized H. Balakrishna, Accounts Officer, is authorized to sign all the Sales Tax Returns, Forms, Statements, declarations etc. He was also authorized to represent the company in the proceedings. In pursuance of a Board of the Company's resolution dated 9.9.1991, the President R. Natarajan of the Company is authorized to nominate from time to time any of the company's employees for the purpose of filing civil suits or criminal complaints in any Court of Law etc., for pursuing or defending cases on behalf of the company and to sign, verify, affirm and file petitions, plaints etc.

9. Ex.P-1 is the Certificate of Incorporation whereunder the complainant company is incorporated under the Companies Act, 1956. Except suggesting that Mr. Natarajan has no authority to delegate the powers to others and that the Director R. Venkataramaraju has no authority to delegate the powers and that Ex.P-9 is not a true and valid document, nothing has been elicited to discredit the testimony of PW-4. As the person who was duly authorized has resigned from service, the Director Venkataramaraju of Madras Cements Limited authorized P. Sreedhar, who is examined as PW-4, to represent the company in the proceedings. The said point was also raised before the Trial Court as well as the appellate Court and both the Courts rejected the said contention. When PW-1 left the service, PW-4 sought permission of the Court to represent the complainant company by filing Crl.M.P.No.5291 of 1994 before the trial Court. The learned Magistrate allowed the said application basing on Ex.P-11 authorisation. Questioning the same, the accused preferred Crl.R.P.No.41 of 1995 and the said petition was dismissed. No doubt, the finding given on the interlocutory application shall not have any bearing on the main case but the fact remains that PW-4 was properly and duly authorized by the complainant company to represent on behalf of the company in all the proceedings and hence the authorization cannot be said to be not in accordance with the Rules of the Company.

10. The second contention raised by the learned Counsel for the petitioner is that the proprietary concern has no legal entity. In support of the said contention, he relied upon a decision of Gujarat High Court in Satish Jayantilal Shah Vs. Pankaj Mashrawala, 1996 Crl. LJ 3099, wherein a learned Single Judge held as follows:

"On this point, a reference be made to definition of "person" defined under Section 11 of Indian Penal Code, which says that 'the word "person" includes any Company or Association or body of persons, whether incorporated or not'. The word 'person' has also been defined in General Clauses Act under Section 3(42) which is similar to that of Section 11 of Indian Penal Code. According to this definition, any Company or Association or body of persons is recognized as legal entity or juridic person. This definition does not include proprietor. Hence a proprietary concern is synonym of proprietor. In fact, the proprietor is the person one who does business but for trading convenience business is done in the name of proprietary concern. Thus the proprietary concern is not an independent, legal and juristic entity having legal recognition in the eye of law. Therefore, neither can initiate any proceedings nor proceedings be initiated against it. In case proprietary concern the proprietor is always an affected person who can either indict or be indicted".

11. In the aforementioned decision, admittedly the original complaints have been filed in personal names without impleading the name of the trading concern under which both the parties are trading, that is to say, proprietary concern. Keeping in mind the aforesaid legal proposition, the present proceedings have been rightly initiated by the proprietor against the accused-proprietor. The contention of the learned Counsel for the petitioner herein can be accepted if only the proprietary concern is shown as accused.

12. In another decision relied upon by the learned Counsel for the petitioner in S.K. Real Estates and others Vs. S. Ahmed Meeran, II (2002) CCR 421, it is held "Accused No.l is not a legal entity or juridical person and the prosecution cannot be maintained against it". Another decision was referred in the aforementioned decision, namely, Vaidyanathan, etc. Vs. M/s. Dodla Dairy Limited, etc., 1999-1 L.W. (Cri.) 395, wherein it is held:

"it is a settled position of law that the proprietorship concern by itself is not a legal entity apart from its proprietor; the proprietary concern and the proprietrix are one and the same person. The learned Judge further held that both proprietorship and proprietrix are one and the same and it can be put in the cause title of the complaint, while prosecuting the drawer either as proprietorship concern represented by proprietrix or the proprietor, representing the proprietorship concern, as both the things convey the same meaning".

13. So, from the above decision it is clear that the cause-title of the complaint can be shown as proprietorship concern represented by proprietor. Precisely, in this case the accused was shown as KVR Enterprises, Proprietor K. Subramanyam s/o Chandram, Hindu, aged about 40 years, resident of Katuru of Krishna District. Therefore, the above said decision in fact supports the case of the complainant.

14. The learned Counsel for the petitioner relied upon another decision of Madras High Court in P. Muthuraman Vs. M/s. Shree Padmavathi Finance (Regd.), I(1994) BC 165, wherein it is held "as the sole proprietary concern is not a company within the meaning of company as defined under explanation to Section 141 of the Negotiable Instruments Act, 1881, sole proprietary concern need not be made as party in the complaint apart from the sole proprietor".

15. The above decision has no application because in this case the proprietary concern was not made as a party apart from the sole proprietor.

16. Learned Counsel for the petitioner further relied upon a decision of Madras High Court in Raman Vs. Krishna Pharmaceutical Distributors, III (1994) CCR 1601, wherein it is held as follows:

"As per Section 138 of the Act, only the drawer of the cheque can be prosecuted. In the complaint in Paragraph, 2, it is stated that the accused i.e., A. Roman. In Paragraph 4, it is stated that the accused issued a cheque. From the above, it transpires that it was A. Roman.

Only the drawer of the cheque can be prosecuted and as such, the proceedings against Sri Janaki Pharmacy who is arrayed as the accused is to be quashed".

17. The above decision has no application since the cheque in this case was given by the accused.

18. Learned Counsel for the petitioner relied upon yet another decision of Madras High Court in B. Adarsh Rao Vs. M/s. Tamil Nadu Electricals rep. By its Manager, 1998(3) Cri 337, wherein it is held:

"The proprietorship concern is not a firm, the firm is a partnership firm consisting of partners. Thus there is a basic and fundamental difference between a firm and a proprietorship concern. The complainant in this case viz., the Tamil Nadu Electricals is not a firm. It is a proprietorship concern cannot initiate legal proceedings. The proprietor or the owner of the said concern is the affected party and he can only file the complaint".

19. Therefore, even from the above decisions it is clear that in case of proprietary concern the proprietor is always an affected person, who can either indict or be indicted. The cause-title of the complaint shows that K. Subramanyam is the proprietor and he is the affected person. Therefore, the complainant as the proprietor of the concern is entitled to file the complaint. Therefore, the contention that the proprietorship concern is the complainant in this case cannot be accepted.

20. The accused himself was examined as DW-1. He admitted that the complainant used to supply cement to him. The cement stock came through lorries after taking his signatures on weigh bills. According to him, as per Ex.D-1 statement of accounts, he is liable to pay Rs.1,47,021/-. According to him, he has not received certain stock under certain weigh bill numbers detailed by him in his evidence. According to him, he is not in arrears. He also denied that he has issued cheque for Rs.3,37,221/- but no such suggestion was given to PW-4 who stated that the accused issued Ex.P-3 cheque. According to him, he is maintaining the accounts and registers for the turnover done by him. If really certain stocks were not supplied to him the accounts books would be the best piece of evidence, but he has not filed any such accounts books. Therefore, no reliance can be placed upon the evidence of DW-1.

21. After elaborate consideration of the case, the Trial Court as well as the appellate Court gave concurrent findings and those findings cannot be said to be perverse or contrary to law. The findings are based upon proper appreciation of the evidence on record. There are absolutely no grounds to interfere with the conviction recorded by the Trial Court as confirmed by the appellate Court.

22. With regard to the sentence, the accused is aged about 40 years at the time of incident. The incident in question took place nearly a decade back. Therefore, it is not desirable at this point of time to send the accused to jail. So, a lenient view can be taken with regard to the sentence. Further, the Magistrate cannot impose a fine over and above Rs.5,000/-. This aspect of the case has been overlooked by both the Trial Court as well as the Appellate Court. Therefore, the sentence can be modified.

23. In the result, the conviction recorded by the Trial Court as confirmed by the Appellate Court against the petitioner accused for the offence under Section 138 of the N.I. Act is confirmed but the sentence of rigorous imprisonment for a period of one year is set aside. The petitioner-accused is sentenced to pay a fine of Rs.5,000/-, in default, to undergo simple imprisonment for two months. Besides the above fine, the petitioner-accused shall also pay a compensation of Rs.3,37,736/- to the complainant company within a period of six weeks from today, failing which, he shall undergo simple imprisonment for a period of six months. With the above modification of sentence, the criminal revision case is partly allowed.

Order accordingly.