2022 (9) TMI 1666 - HC - Indian Laws

Maintainability of application u/s 319 of the CrPC that was allowed by the learned Magistrate in permitting Mrs. Rupa Banerji and Mr. P.K.Majumdar to be arrayed as accused along with the Company and the order of the learned Sessions Judge in Criminal Revision Petition in setting aside the said order - liability of signatory of the cheque - HELD THAT - Having issued cheques for the aforesaid amount in all the transactions the accused cannot now wash of their liability on a technical plea that notice is not issued to Mrs. Rupa Banerji and the plea of Mr. Jolly Banerji that he is not the signatory to the cheques or any other hypertechnical plea cannot be taken to escape the clutches of law. The proprietorship concern is answerable through the proprietor or the proprietrix be it Mr. Jolly Banerji or Mrs. Rupa Banerji. It is an admitted fact that Mrs. Rupa Banerji is the proprietrix. Therefore the learned Magistrate was right in allowing the application filed under Section 319 of the Cr.P.C. and permitting Mrs. Rupa Banerji and Mr. P.K.Majumdar to be arrayed as accused along with proprietorship concern and they will have to meet the accusation. Mr. P.K.Majumdar is roped in on the ground that he is signatory to several cheques. A caveat this principle would not become applicable to a Company or a partnership firm. These observations and finding are limited only to a proprietorship concern as there cannot be more than one proprietor or proprietrix. The order of the learned Sessions Judge upturning the order passed by the learned Magistrate is fundamentally flawed requiring appropriate interference - Petition allowed.

Summary

The core legal question considered by the Court is whether the order passed by the learned Magistrate allowing the petitioner's application under Section 319 of the Code of Criminal Procedure (CrPC) to implead Mrs. Rupa Banerji and Mr. P.K. Majumdar as accused along with the proprietorship concern was tenable in law, and consequently, whether the revision order by the Sessions Judge setting aside that order was sustainable.

The dispute arises from a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) concerning dishonour of cheques issued by a proprietorship concern named RNB Design Arc Systems ("RNB"). The petitioner had entered into a business arrangement with RNB, initially represented by Mr. Jolly Banerji. However, during trial, it was revealed that Mrs. Rupa Banerji claimed proprietorship of RNB, creating ambiguity about the true proprietor. The petitioner sought to add Mrs. Rupa Banerji and Mr. P.K. Majumdar as accused under Section 319 CrPC, which was allowed by the Magistrate but later set aside by the Sessions Judge.

Issue-wise detailed analysis is as follows:

1. Scope and applicability of Section 319 CrPC in complaint cases under Section 138 NI Act

The Court examined the ambit of Section 319 CrPC, which empowers a court to proceed against any person not originally accused if evidence during trial suggests their involvement in the offence. The power is discretionary and extraordinary, intended to ensure complete justice by including all culpable persons in the trial.

The Court relied heavily on the authoritative five-judge Apex Court decision in Hardeep Singh v. State of Punjab, which clarified that:

• The power under Section 319 CrPC can be exercised only after trial has commenced and evidence has been recorded.
• "Evidence" includes the evidence adduced before the court, not limited to cross-examined testimony but also examination-in-chief statements.
• The power is to be exercised sparingly and only when there is strong and cogent evidence against the person sought to be added, more than a mere probability but less than proof beyond reasonable doubt.
• The court is not to form an opinion on guilt but only on the prima facie involvement of the person in the offence.
• Section 319 aims to ensure persons who ought to be tried are not left out, promoting justice and fairness.

The Court also noted that complaint proceedings under Section 138 NI Act are offender-centric, meaning the accused is the drawer of the cheque or the person responsible for the offence, not merely the offence itself.

2. Nature of proprietorship concern and liability of proprietor/proprietrix

The Court emphasized the legal nature of a sole proprietorship firm, which has no separate legal entity distinct from the proprietor. The proprietorship concern is effectively the business name of the sole proprietor or proprietrix. Therefore, in a proprietorship concern, there can only be one proprietor or proprietrix who is responsible for the business and any liabilities arising therefrom.

In this case, the petitioner dealt with RNB, a proprietorship concern, and issued cheques drawn on its account. The question was whether Mrs. Rupa Banerji, claiming to be proprietrix, could be impleaded as accused along with the firm and Mr. P.K. Majumdar, who was signatory to several cheques.

The Court rejected the contention that the petitioner was mistaken in naming the accused, noting that the proprietor or proprietrix is immaterial to the liability of the proprietorship concern, and the proprietor/proprietrix must answer allegations against the firm. The Court distinguished the present case from partnership firms or companies, where different rules apply regarding vicarious liability and representation.

3. Validity of the Magistrate's order allowing impleadment under Section 319 CrPC

The Magistrate allowed the petitioner's application to implead Mrs. Rupa Banerji and Mr. P.K. Majumdar as accused, relying on evidence including cross-examination testimony indicating Mrs. Rupa Banerji as proprietrix and the fact that Mr. Majumdar was signatory to cheques. The Magistrate issued notices to them and directed their arraignment.

The Sessions Judge, on revision, set aside this order, reasoning that:

• The proprietorship concern is not a company; thus, Section 141 of the NI Act (which relates to company offences) is inapplicable.
• There was no allegation or explanation in the complaint against Mrs. Rupa Banerji and Mr. Majumdar, a requirement for prosecution.
• The application under Section 142(b) CrPC for condonation of delay was improperly used to justify the Section 319 CrPC application.
• Since there was no compliance with Section 138 NI Act requirements against these individuals, there was no cause of action to prosecute them.

The Court found these reasons unsustainable, holding that the learned Sessions Judge erred in setting aside the Magistrate's order. The Court observed that the Magistrate's order was based on cogent evidence and was in line with the principles of Section 319 CrPC as explained by the Apex Court.

4. Treatment of competing arguments

The petitioner argued that throughout the business relationship, communication and transactions were with Mr. Jolly Banerji, who represented himself as proprietor, but no disclosure was made that Mrs. Rupa Banerji was the actual proprietrix. The petitioner contended that the proprietorship concern cannot escape liability by hiding behind ambiguity about the proprietor's identity. The petitioner relied on precedents supporting the broad and sparing use of Section 319 CrPC to ensure justice.

The respondents contended that Mrs. Rupa Banerji was not issued any notice, did not respond to allegations, and that the application was an afterthought years after proceedings commenced. They argued Section 319 CrPC should not be used to add accused persons without proper procedural compliance, especially in Section 138 NI Act cases which are offender-centric. They also relied on a precedent involving partnership firms to argue that the principles applied were inapplicable here.

The Court rejected the respondents' arguments, distinguishing the partnership firm precedent as irrelevant to a proprietorship concern. The Court emphasized that in a sole proprietorship, the proprietor or proprietrix is the business and liable for its obligations. The Court also held that procedural safeguards were complied with, including notice and opportunity to be heard.

5. Application of law to facts and findings

The Court applied the legal framework and precedents to the facts, noting:

• The petitioner issued legal notice to the proprietorship concern and received reply from it, with no indication of the true proprietor's identity.
• Evidence during trial revealed that Mrs. Rupa Banerji claimed to be proprietrix, creating confusion.
• Witness testimony corroborated Mrs. Rupa Banerji's proprietrix status.
• Mr. P.K. Majumdar was signatory to several cheques involved in the transactions.
• Given the proprietorship nature of the firm, the proprietor/proprietrix must be held accountable.
• The power under Section 319 CrPC was properly exercised by the Magistrate on the basis of prima facie evidence.

The Court concluded that the Magistrate's order was legally sound and that the Sessions Judge's order setting it aside was flawed.

Significant holdings and principles established:

"Section 319 of the CrPC gives a right to the prosecution/complainant to seek any other parties to be arrayed as accused in a proceeding, if during the course of evidence if it emerges that those parties will also have to be tried for the offence. But, this power to summon those persons who are not named in the charge sheet or given up in charge sheet in the case at hand while taking cognizance, is an extraordinary power which should be used in extraordinary circumstances."

"The purpose of Section 319 CrPC is to do complete justice and to ensure that persons who ought to have been tried as well are also tried."

"The power under Section 319 CrPC is a discretionary and an extraordinary power. It is to be exercised sparingly and only in those cases where the circumstances of the case so warrant."

"Though only a prima facie case is to be established from the evidence led before the court, not necessarily tested on the anvil of cross-examination, it requires much stronger evidence than mere probability of complicity."

"A sole proprietorship firm has no separate legal entity, but in fact it is a business name of the sole proprietor. Any reference to proprietorship firm means and includes the sole proprietor."

"The accused is the proprietorship concern but who the proprietor or proprietrix would become immaterial... the proprietor or proprietrix would have to answer the allegations."

"The proprietorship concern is answerable through the proprietor or the proprietrix... The learned Magistrate was right in allowing the application filed under Section 319 of the CrPC and permitting Mrs. Rupa Banerji and Mr. P.K. Majumdar to be arrayed as accused along with proprietorship concern and they will have to meet the accusation."

Accordingly, the Court allowed the criminal petitions, quashed the revision order of the Sessions Judge, and restored the Magistrate's order permitting impleadment of Mrs. Rupa Banerji and Mr. P.K. Majumdar as accused along with the proprietorship concern.