Facts
The petitioner filed a complaint under Section 138 of the Negotiable Instruments (NI) Act, 1881, alleging that the opposite party no. 2 (Proprietor of Durga Ji Rice Mill) issued a cheque for Rs. 6,00,000/- for the purchase of paddy, which was subsequently dishonored.
Source reference: p. 2Following a legal notice and non-payment, the Judicial Magistrate 1st Class, Ara, took cognizance of the offence on 19.05.2022.
Source reference: p. 2However, the Sessions Judge, Bhojpur, in a revisional order dated 03.01.2023, set aside the cognizance on the grounds that the firm, "Durga Ji Rice Mill," was not made a party to the complaint as required under Section 141 of the NI Act.
Source reference: p. 2-3The petitioner challenged this revisional order before the High Court.
Source reference: p. 1Issues
1. Whether a proprietorship firm is a "company" within the meaning of Section 141 of the Negotiable Instruments Act, requiring the firm to be joined as an accused alongside the proprietor.
Source reference: p. 3 / para. 72. Whether the revisional court erred in setting aside the cognizance order based on the non-joinder of the proprietorship firm.
Source reference: p. 8 / para. 16Law Applied
The court applied Section 138 (dishonour of cheque) and Section 141 (offences by companies) of the Negotiable Instruments Act, 1881.
Source reference: p. 2-3It relied on the Supreme Court precedent in Raghu Lakshminarayanan v. M/s Fine Tubes (2007), which established that a proprietary concern is not a "company" or "juristic person" under Section 141, and the proprietor is solely responsible for its affairs.
Source reference: p. 4-5It distinguished the present case from Aneeta Hada v. M/s Godfather Travels & Tours Pvt. Ltd. (2012), which mandates joining a company as an accused only when the entity is a juristic person (like a registered company or partnership).
Source reference: p. 6-7Reasoning
The High Court observed that "Durga Ji Rice Mill" is a sole proprietorship firm owned by opposite party no. 2.
Source reference: p. 3, 8The court reasoned that unlike a company or a partnership firm, a proprietorship has no legal identity separate from its proprietor.
Source reference: p. 4, 8Therefore, the vicarious liability provisions under Section 141 of the NI Act, which require the "company" to be prosecuted as a condition precedent to prosecuting its directors/officers, do not apply to proprietary concerns.
Source reference: p. 8-9The court found that the Revisional Court committed a "gross illegality" by misapplying Section 141 to a business that does not operate under the Companies Act or as a separate legal entity.
Source reference: p. 4, 9Holding
The High Court held that making a proprietorship firm an accused is not mandatory under the NI Act as the proprietor is the sole accountable entity.
The court answered the issues in the affirmative, setting aside the Sessions Judge’s order dated 03.01.2023.
Source reference: p. 9The Magistrate Court was directed to proceed with Complaint Case No. 429(C) of 2022 from the stage of cognizance and issue fresh summons to the accused.
Source reference: p. 9The application was allowed.
Source reference: p. 9Original Court PDF
Bablu Kumar v. The State of Bihar & Anr. [Criminal Miscellaneous No. 10844 of 2024]
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