A company-issued cheque may validly discharge a proprietor’s tenancy liability despite absent contractual privity with the company.

Kishan Singh instituted a suit for recovery of ₹5,80,910 against M/s Rita Plastic Industries, described as the proprietorship concern of Rita Batra, claiming arrears of rent, electricity dues, and ₹1,00,000 represented by a dishonoured cheque.

The premises had been let by the plaintiff’s father to the proprietorship concern at a monthly rent of ₹6,500 under a rent agreement.

The defendant contended that the proprietorship had been converted into M/s Rita Plastics Private Limited, that the premises had been vacated in June 2012, that the electricity dues had been paid, and that the cheque had been issued as a blank security cheque after which ₹1,00,000 was allegedly paid in cash to the plaintiff’s father.

The Trial Court rejected the claims for rent and electricity dues but decreed ₹1,00,000 with simple interest at 6% per annum from the date of institution until realisation, holding that the cheque’s issuance was admitted and that the defence of cash payment was unproved.

The defendant appealed under Section 96(1) CPC, challenging the maintainability of the suit, the attribution of liability for the cheque, the application of Section 139 of the Negotiable Instruments Act, and the plaintiff’s entitlement as a co-owner.

Whether the suit was bad for misjoinder or non-joinder because the tenancy was with the proprietorship concern, whereas the cheque was drawn on the account of M/s Rita Plastics Private Limited.

Whether the plaintiff was entitled to recover ₹1,00,000 on the dishonoured cheque when the defendant alleged that it was a blank security cheque and that the amount had subsequently been paid in cash.

Whether the plaintiff, being a co-owner under the Will, could maintain the suit and recover the decretal amount without impleading or obtaining the express consent of the other co-owner.

Whether the Trial Court’s decree for the cheque amount was inconsistent with its dismissal of the claims for subsequent rent and electricity dues.

The Court exercised appellate jurisdiction under Section 96(1) of the Code of Civil Procedure, 1908.

Order I Rule 9 CPC embodies the principle that a suit should not fail merely for misjoinder or non-joinder where the controversy can be effectively adjudicated; the Court also relied on Mumbai International Airport Pvt. Ltd. v. Regency Convention Centre & Hotels Pvt. Ltd., AIR 2010 SC 3109, concerning non-joinder and effective adjudication.

Under Section 139 of the Negotiable Instruments Act, 1881, once the execution and signature of a cheque are admitted, a presumption arises that it was issued in discharge of a legally enforceable debt or liability; the drawer may rebut it on a preponderance of probabilities, as explained in Basalingappa v. Mudibasappa, (2019) 5 SCC 418.

Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, establishes that a voluntarily delivered blank signed cheque does not, by itself, negate the statutory presumption or absolve the drawer.

A co-owner is entitled to sue for protection or recovery concerning the entire property unless the other co-owners actively object, as held in Mohinder Prasad Jain v. Manohar Lal Jain, (2006) 2 SCC 724.

The Court held that although the cheque was drawn from the account of the incorporated company, it had been issued by Rita Batra in connection with the tenancy and in discharge of the liability arising from the underlying transaction.

The continuity of management and the company’s own memorandum, which contemplated taking over the business, assets, and liabilities of the proprietorship, prevented the appellant from relying on a purely technical distinction between the two entities.

Since issuance and signature of the cheque were admitted, Section 139’s presumption applied.

The allegation that the cheque was merely a security cheque and that the amount had been paid in cash was unsupported by a receipt or by the testimony of the alleged witness, Ram Niwas; accordingly, the presumption was not rebutted.

The Court found no inconsistency in awarding the cheque amount while rejecting the rent and electricity claims, because those claims were independently rejected for want of satisfactory proof, whereas the cheque liability was supported by the statutory presumption and the defendant’s failure to prove discharge.

The plaintiff could also maintain the action as a co-owner, particularly since he pleaded an oral partition and there was no objection from his brother.

The decree for ₹1,00,000 with simple interest at 6% per annum from the date of institution until realisation, together with costs, was affirmed; the pending applications were disposed of.