AI OCR 
TaxTMI 
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2022 (4) TMI 300
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....ct cheque, he cannot be criminally held liable to be prosecuted under Section 138 of the Negotiable Instruments Act 1881. 3. The learned counsel for the petitioner/accused submitted that, Section 138 of the Negotiable Instruments Act, 1881 holds responsible only the person, who draws the cheque on an account maintained by him. Section 7 of the Negotiable Instruments Act, 1881 defines, who is a Drawer. In case of a bank account in the name of the Proprietor concern, only the proprietor is liable and not the mandate holder or the authorised signatory be liable for the dishonour of the said cheque. Unlike 'company' defined in Section 141 of the Negotiable Instruments Act, a 'Proprietor concern' is not owned by collection of persons but owned by individual. Therefore, the principle of vicarious liability will not apply. The said individual, who owns the Proprietor concern alone is liable to be prosecuted, since he/she alone maintains the account and not the authorised signatory. 4. To buttress his submission, the learned counsel for the petitioner rely upon the judgment of this Court rendered in N. Gopalan vs. K. Udayakumar reported in [ 2009(4) CTC 217]. 5. The Lear....
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....ing issued the cheque, in order to cheat the complainant, the first and second accused have instructed the bank to block the account. The first accused as the Proprietrix of M/s. Jaanthar Apparels and the second accused as the authorised signatory both are responsible and liable to be prosecuted. Hence, after issuance of the statutory notice complaint under Section 138 of Negotiable Instruments Act, 1881. 9. The point canvassed by the petitioner/second accused is that, the authorised signatory will not fall within the meaning of drawer. He is not the person, who maintains the account. "Section 7 of the Negotiable Instruments Act, 1881 defines "Drawer", "drawee" as below:- "The maker of a bill of exchange or the cheque is called the "Drawer", the person thereby directed to pay is called the "drawee". "The expression drawer under Section 7 of the Act can be a natural person or an incorporated person or a body of persons whether incorporated or not. The word 'person' as defined in Section 11 of the Indian Penal Code includes a natural person, an incorporated person or even an unincorporated association or body of persons like a partnership. The expression 'drawing....
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.... money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.--For the purposes of this section, debt of other liability means a legally enforceable debt or other liability." 10. In the instant case, the petitioner having signed the cheque, he is undoubtedly the drawer of the cheque. His defence is, he is not maintaining the account and the account is maintained in the name of the Proprietor concern, namely "M/s. Jaanthar Apparels". Since the penal provision under the Negotiable Instruments Act, 1881 says, cheque drawn by a person on an account maintained by him. 11. The learned counsel appearing for the petitioner cited the judgment of this Court rendered in N. Gopalan vs. K. Udayakumar (2009 (4) CTC 217) which has relied on in Surendra Mal Metha and Another vs. M/s. Gillette India Ltd. reported in [2006 (1) MWN (Cri.) (DCC) 88] and R. Ravi chandran vs. C. Subramanaian @C.S. Maniam Mandate Holder of M/s. Southern Biologicals, Coimbatore reported in [2006 (1) MLJ (crl.) 68] and submit that the Courts have consistently held that the mandate holder/authorised signatory cannot be held liab....
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....ent 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 anybody 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 Partnership Act. 11. If Accused 1 was not a company within the meaning of Section 141 of the Negotiable Instruments Act, the question of an employee being proceeded against in terms thereof would not arise. The 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 Accused 1, as a business concern. Significantly, the respon....
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....ry to the cheque. This dictum cannot be applied to the signatory of a cheque, who is authorised to maintain the account on behalf of the Proprietor concern. Misapplication of the dictum of the Hon'ble Supreme Court by the Courts below can not be taken as a precedent or binding. It is to be ignored as obiter dicta. 16. This Court put a pointed question to the learned counsel for the petitioner, whether if the account not blocked and sufficient fund available in the account, would the bank have cleared the cheque?. The answer was positive. Therefore, the understanding between the account holder, authorised signatory and the bank is that the cheque drawn by the authorised signatory will be honoured, provided there is sufficient fund available in the account. That means, the account opened in the name of the Proprietor concern, is in fact maintained by the authorised signatory and not the person in whose name the proprietor concern stands. 17. Again going back to the commentaries on the Negotiable Instruments Act by Bhashyam and Adiga's 11th Edition, the liability of the authorised signatory in a cheque bounce case is explained in the following terms:- "62. Cheque issued by....