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2020 (10) TMI 575 - HC - Indian LawsDishonor of Cheque - maintaining prosecution under section 141 of N.I. Act for arraining the company as an accused - main contention of the petitioner is that the prosecution could not launch unless and until the firm arraign as accused - whether in sole proprietorship firm indictment of firm arraign as parties is necessary or not? - HELD THAT:- The phrase "association of individuals" necessarily requires such entity to be constituted by two or more individuals i.e. natural persons. On the contrary a sole-proprietorship concern, by very description does not allow for ownership to be shared or be joint and it defines, restricts and dictates the ownership to remain with one person only. Thus, "associations of individuals" are absolutely opposed to sole-proprietorship concerns, in that sense and aspect - A 'partnership' on the other hand is a relationship formed between persons who willfully form such relationship with each other. 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 his 'company', though a partnership is not an artificial person. So also, upon being thus equated, the partnership 'firm' and its partner/s has/have to be impleaded as an accused person in any criminal complaint, that may be filed alleging offence committed by the firm. However, there is no indication in the statute to stretch that legal fiction to a sole proprietary concern - Besides, in the case of a sole proprietary concern, there are no two persons in existence. Therefore, no vicarious liability may ever arise on any other person. The identity of the sole proprietor and that of his 'concern' remain one, even though the sole proprietor may adopt a trade name different from his own, for such 'concern'. The principle contained in section 141 of the Act is not applicable to a sole-proprietary concern. The petitioner taken the money in advance by way of loan and petitioner handed over the cheques bearing no. 850213 & 850214 amount of ₹ 50,000/- each only for the security for payment of money advance by way of loan. So the transaction of money and cheques not in the prosecution of business of firm but cheques handed over by petitioner to Nepal Singh in individual capacity. So due to aforesaid reason too no need to implead the sole proprietor firm by his firm name - there is no illegality or irregularity in the orders. Petition dismissed.
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