TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 796
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....The issue is stated to be covered by a Single Judge decision of this Court in the Application u/s 482 No. 31101 of 2013 (Hitendra Kishan Lal Jain Vs. State of U.P. & Anr.), decided on 13.12.2017. 4. That case involved default/dishonour of a cheque issued by a proprietorship firm. After referring to Section 141 of the Act, and relying in decision of the Supreme Court in the case of Aneeta Haada Vs. Godfather Travels and Tours Private Limited and Anr., (2014) 6 SCC(Cri) 845, the learned Single Judge observed:- "Since cheques in question were belonging to a Firm and vide explanation appended to Section 141 of the Negotiable Instrument Act, firms or other association of individual are also included in the word 'Company'. Hon'ble Supreme Court in the case of Aneeta Hada (supra) has clearly held that if cheque is issued by a Firm or Company, the Firm / Company must be arrayed as an accused. Same view has been expressed by the Hon'ble Supreme Court in the cases relied upon by the learned counsel for the applicant that until and unless Company or Firm is arrayed as an accused, director or other officials of the Company / Firm cannot be prosecuted / punished. ............
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....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." 7. A plain reading of the provision makes it clear, if the person committing the offence is a "company", in that event every natural person responsible for such commission as also the artificial person namely the company shall be deemed to be guilty of the offence and be liable to be proceeded against and punished accordingly. Also, certain other natural persons may be held guilty, if so proved. 8. By way of the Explanation (a) attached to that provision of law, the term 'company' (specifically for the purpose of Section 141 of the Act), has been defined to mean a body corporate or a firm or any other assoc....
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.... a trade name acquired by an individual or a person for the purpose of conducting a particular activity. With or without such trade name, it (sole proprietary concern) remains identified to the individual who owns it. It does not bring to life any new or other legal identity or entity. No rights or liabilities arise or are incurred, by any person (whether natural or artificial), except that otherwise attach to the natural person who owns it. Thus it is only a 'concern' of the individual who owns it. The trade name remains the shadow of the natural person or a mere projection or an identity that springs from and vanishes with the individual. It has no independent existence or continuity. 14. In the context of an offence under section 138 of the Act, by virtue of Explanation (b) to section 141 of the Act, only a partner of a 'firm' has been artificially equated to a 'director' of a 'company'. Its a legal fiction created in a penal statute. It must be confined to the limited to the purpose for which it has been created. Thus a partner of a 'firm' entails the same vicarious liability towards his 'firm' as 'director' does towards ....
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.... 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." (emphasis supplied) 17. In Bhagwati Vanaspati Traders v. Supt. of Post Offices, (2015) 1 SCC 617, it has been held: "11. We find merit in the second contention advanced at the hands of the learned counsel for the appellant. It is indeed true, that the NSC was purchased in the name of M/s Bhagwati Vanaspati Traders. It is also equally true, that M/s Bhagwati Vanaspati Traders is a sole proprietorship concern of B.K. Garg, and as such, the irregularity committed while issuing the NSC in the name of M/s Bhagwati Vanaspati Traders, could have easily been corrected by substituting the name of M/s Bhagwati Vanaspati Traders with that of B.K. Garg. For, in a sole proprietorship concern an individual uses a fictional trade name, in place of his own name". (emphasis supplied) 18. Directly relevant to the question raised in the present proceedings, in Raghu Lakshminarayanan v. Fine Tubes, (2007) 5 SCC 103, it was observed: "8. The concept of vicarious liability was introduced in penal statutes like the Negotiable Instruments Act ....
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....ership Act". (emphasis supplied) 19. The Madras High Court, in Sri Sivasakthi Industries Vs. Arihant Metal Corporation 1992 (74) Company Cases 749, P. Muthuraman Vs. Padmavathi Finance (Regd) 1994 (80) Company Cases 656 and again in S.K. Real Estates and Another Vs. Ahmed Meeran 2002 (111) Company Cases 400 has consistently held that a sole proprietorship is neither a firm nor a company nor an association of individuals, under section 141 of the Act. 20. In contrast, in Aneeta Haada (supra), there existed a duly incorporated company whose cheque signed by its authorized signatory (Aneeta Haada), had been dishonored giving rise to the criminal complaint alleging commission of offence under Section 138 of the Act. The Supreme Court held, in the case of offence under Section 138 of the Act being committed by a company/juristic person, it would be imperative to first arraign the company (juristic person) as an accused person. The other category of offenders i.e. natural person/s may be arraigned only on the touchstone of vicarious liability. 21. That three judge decision of the Supreme Court is based on and follows the earlier three judge decision of that Court in St. of Madras V....