MILIND SHRIPAD CHANDURKARversusKALIM M. KHAN & ANR.

                         [2011] 3 S.C.R. 698

A                MILIND SHRIPAD CHANDURKAR
                                  V.
                      KALIM M. KHAN & ANR.
                 (Criminal Appeal No. 643 of 2011)
                           MARCH 3, 2011
B
        [P. SATHASIVAM AND DR. B.S. CHAUHAN, JJ.]

         Negotiable Instruments Act, 1881 - ss.138 and 142 -
    Complaint uls. 138 - Locus standi of the complainant -
C   Respondent no. 1 issued cheque in favour of proprietary firm
    towards discharge of a pre-existing legal liability - Cheque .
    dishonoured - Appellant claimed to be proprietor of the said
    proprietary firm - He filed complaint against respondent no. 1
    u/s. 138 - Both trial court and appellate court convicted
D   respondent no. 1 - High Court, however, set aside the
    conviction on the ground that appellant could not produce any
    evidence to establish that he was proprietor of the proprietary
    concern in question and, thus, he had no locus standi to file
    the complaint - Justification - Held: Justified - A person can
E   maintain a complaint u/s. 138, provided he is either a_ "payee·
    or "holder in due course" of the cheque - In a case of this
    nature, where the "payee" is a company or a sole proprietary
    concern, such issue cannot be adjudicated upon taking any
    guidance from s. 142 but the case shall be governed by the
F   general Jaw i.e. the Companies Act 1956 or by civil Jaw where
    an individual carries on business in the name or style other
    than his own name - In such a situation, he can sue in his
    own name and not in trading name, though others can sue
    him in the trading name - It is evident that the firm in question
    was the "payee" of the cheque and the appellant could not
G   claim to be the "payee", nor could he be the "holder in due
    course", unless he established that the cheques had been
    issued to him or in his favour or that he was the sole proprietor
    of the firm and being so, he could also be payee himself and

H                                698
MILIND SHRIPAD CHANDURKAR v. KALIM M. KHAN 699
                  &ANR.
thus, entitled to make the complaint - The appellant failed to   A
produce any documentary evidence to connect himself with
the said firm, nor made any attempt to adduce any additional
evidence at the appellate stage, in spite of the fact that the
respondent raised this issue from the initial stage.
                                                              B
     The appellant claimed to be the sole proprietor of the ·
Firm, namely, Vijaya Automobiles, which had the business
of supplying fuel. The firm had supplied a huge quantity
of diesel to respondent no.1. In order to meet the liability,
respondent no.1 made payment vide Cheque in the name
of the said proprietary Firm for an amount of Rs.7,00,000/ C
-. The appellant deposited the said cheque in the bank
account of the said Firm. The Bank returned the said
cheque mentioning "unpaid" with a Memorandum "funds
are insufficient". The appellant sent notice which stood
served upon respondent no.1. The respondent no.1 D
neither replied to the notice, nor made payment within 15 ·
days of receipt of the notice.

     The appellant thereafter filed a complaint case before
the Judicial Magistrate under section 138 of the                 E
Negotiable Instruments Act, 1881. The trial Court
convicted respondent no.1 to suffer simple imprisonment
till rising of the court and to pay compensation of
Rs.7,10,000/- and in default of payment thereof, to suffer
simple imprisonment for six months. Aggrieved,                   F
respondent no.1filed criminal appeal. The Sessions
Judge reduced the amount of compensation from
Rs. 7, 10,000/- to Rs. 7,00,0001-. Still aggrieved, respondent
no.1 preferred Criminal Revision application. The High
Court allowed the application on the ground that the             G
appellant could not produce any evidence to establish
that he was the sole proprietor of the proprietary concern
in question and, thus, he had no locus standi to file the
COfl'lplaint. Hence, the present appeal.
    Dismissing the appeal, the Court                             H
    700   SUPREME COURT REPORTS             [2011] 3 S.C.R.

A      HELD:1.1. It is evident from the facts and
  circumstances of the case that the appellant/complainant
  could not produce any document to show that he was
  the proprietor of Vijaya Automobiles in spite of the fact
  that the issue had been agitated by the respondent no.1/
B accused at every stage. It is also evident from the
  documents on record that in the list of witnesses, the
  complainant had mentioned the name of his banker as a
  witness, however, the said banker was not examined.
  Significantly, the appellant did not make any attempt to
c adduce additional evidence at the appellate stage also.
  No document was ever filed to substantiate his averment
  in this regard. [Paras 16, 17] [707-B-D]

        1.2. A person can maintain a complaint under Section
  138 of the Negotiable Instruments Act, 1881, provided he
D is either a "payee" or "holder in due course" of the
  cheque. Section 7 of the Act defines "Payee" as the
  person named in the instrument, to whom or to whose
  order the money is by the instrument directed to be paid.
  Section 8 defines "the holder of the cheque" as any
E person entitled in his own name to the possession
  thereof and to receive or recover the amount due thereon
  from the parties thereto. Section 9 defines "holder in due
   course" as any person who for consideration became the
  'possessor of a cheque if payable to a bearer or the
F payee or endorsee thereof. In a case of this nature, where
  the "payee" is a company or a sole proprietary concern,
  such issue cannot be adjudicated upon taking any
   guidance from Section 142 of the Act (which provides for
  taking cognizance of the offence) but the case shall be
G governed by the general law i.e. the Companies Act 1956
   or by civil law where an individual carries on business
   in the name or style other than his O\tn name. In such a
   situation, he can sue in his own name and not in trading
   name, though others can sue him in the trading name. So
H far as Section 142 is concerned, a complaint shall be
MILIND SHRIPAD CHANDURKAR v. KALIM M. KHAN 701
                  & ANR.
maintainable in the name of the "payee", proprietary          A
concern itself or in the name of the proprietor of the said
concern. [Paras 22, 18, 20) [709-C; 707-D-E; 708-C-D]

      1.3. In the instant case, it is evident that the firm,
namely, Vijaya Automobiles, has been the payee and that 8
the appellant cannot claim to be the payee of the cheque, I
nor can he be the holder in due course, unless he
establishes that the cheques had been issued to him or
in his favour or that he is the sole proprietor of the
concern and being so, he could also be payee himself
and thus, entitled to make the complaint. The appellant C
miserably failed to prove any nexus or connection by
adducing any evidence, whatsoever, worth the name with
the said firm, namely, Vijaya Automobiles. Mere statement
in the affidavit in this regard, is not sufficient to meet the
requirement of law. The appellant failed to produce any D
documentary evidence to connect himself with the said
firm. It is evident that the firm had a substantial amount
of business as in one month it sold the diesel to
respondent no. 1 - a single party, for a sum of Rs. 7 lakhs.
The appellant would, in addition, have also been carrying E
out business with other persons. Thus, a person with
such a big business must have had transactions with the
bank and must have been a payee of income tax, sales
tax etc. Thus, in such a fact-situation, there would be no
dearth of material which could have been produced by F
the appellant to show that he was the sole proprietor of
the said firm. The appellant failed to adduce any evidence
in this regard, nor made any attempt to adduce any
additional evidence at the appellate stage, in spite. of the .
fact that the respondent is raising this issue from the G
initiation of the proceedings. In view of the above, there
is no cogent reason to interfere with the impugned
judgment and order of the High Court. [Paras 23, 24) [709-
D-H; 710-A-B]
                                                               H
    702      SUPREME COURT REPORTS               [2011) 3 S.C.R.


A        Shankar Finance and Investments v. State of Andhra
    Pradesh &Ors. (2008) 8 SCC 536; Janki Vashdeo Bhojwani
    v. lndusind Bank Ltd. (2005) 2 SCC 217; National small
    Industries Corporation Ltd. v. State (NCT of Delhi) & Ors.
    (2009) 1 sec 407 - relied on.
B
                         Case Law Reference:

          (2008) a sec 536        relied on            Para 20

          (2005) 2 sec 211        relied on            Para 20
c         (2009) 1 sec 401        relied on            Para 21

        CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
    No. 643 of 2011.

      From the Judgment & Order dated 18.2.2008 of the High
D Court of Judicature at Bombay in Criminal Revision Application
  No. 656 of 2007.

                                  WITH

          SLP (Crl.) Nos. 3122 & 3124 of 2008.
E
        Shekhar Nafade, Shankar Chillarge, AAG, Satyajit A.
    Desai, Prashant R. Dahat, Somanath Padhan, Anagha S.
    Desai, Viraj Kadam, Pinaki Addy, Suhas Kadam, D.M.
    Nargolkar, Asha Nair, Ravindra Keshavrao Adsure for the
F   appearing parties.

          The Judgment of the Court was delivered by

          DR. B.S. CHAUHAN, J. 1. Leave granted.

G        2. This appeal has arisen out of judgment and order dated
    18.2.2008 passed by the High Court of Judicature at Bombay
    in Criminal Revision No.656 of 2007 by which the High Court
    has set aside the judgments and orders of the trial Court as
    well as of the Appellate Court convicting the respondent no.1
H
MILIND SHRIPAD CHANDURKAR v. KALIM M. KHAN 703
         & ANR. [DR. B.S. CHAUHAN, J.]
for the offences punishable under Section 138 of the _Negotiable     A
Instruments Act, 1881 (hereinafter called the Act 1881) and
sentencing him for the period, till the rising of the Court and to
pay compensation of a sum of Rs.7,00,000/-. Failing which, the
respondent would serve simple imprisonment for a period of
six months.                                                          B

     3. The facts and circumstances giving rise to this case are
that the appellant/complainant claimed to be the sole proprietor
of the Firm, namely, Vijaya Automobiles, which had the
business of supplying fuel. The firm had supplied a huge
quantity of diesel to respondent no.1 in the month of March          C
2005. In order to meet the liability, the Respondent no.1 made
the payment vide Cheque No.490592 dated 28.4.2005 in the
name of the said proprietary Firm drawn on Development
Credit Bank, Kurla Branch, Bombay for an amount of
Rs. 7,00,000/- (Rupees seven lakhs only). The appellant/             D
complainant deposited the said cheque in the account of the
said Firm in Bank of India Uran Branch on 12.9.2005.

     4. The Development Credit Bank returned the said cheque
mentioning "unpaid" with a Memorandum "funds are                     E
insufficient". 'The appellant/complainant sent notice dated
11.10.2005 ~Y Registered AD. post as well as under certificate
of posting. 'The respondent no.1/accused did not accept the
notice sent by Registered AD. post. However, the notice sent
by certificate of posting stood served upon him as the               F
respondent no.1 admitted the said fact in his statement under
Section· 313 of the Code of Criminal Procedure, 1973
(hereinafter called Cr.P.C.). The respondent no.1/accused n
ither replied to the notice, nor made the payment within 15 days
of the receipt of the notice.
                                                                     G
     .5. The appellant/complainant filed a complaint case no.545
of 2005 before the Judicial Magistrate, First Class, Uran under
section 138 of the Act 1881 on 22.11.2005. The case was
tried, however, the respondent no.1/accused did not enter the
witness box and after considering the case, the trial Court vide     H
    704      SUPREME COURT REPORTS                 [2011) 3 S.C.R.

A judgment and order dated 22.12.2006 concluded the trial
  convicting the respondent no.1 to suffer simple imprisonment
  till rising of the court and to pay compensation of Rs.7, 10,000/
  - and in default of payment thereof, to suffer simple
  imprisonment for six months. It was directed that out of the
B aforesaid amount of compensation, a sum of Rs.10,000/- be
  credited to Raigad District Legal Aid Committee.

       6. Being aggrieved of the aforesaid judgment and order,
  the respondent no.1 /accused filed Criminal Appeal No.85 of
C 2006. The learned Sessions Judge vide judgment and order
  dated 18-19/9/2007 dismissed the said appeal, with the
  amount of compensation being reduced from Rs.7,10,000/- to
  Rs.7,00,000/-. Thus, the direction to credit the amount of
  Rs.10,000/- to Raigad District Legal Aid Committee was set
  aside.
D
       7. Being aggrieved, respondent no.1 preferred Criminal
  Revision Application No.656 of 2007 before the High Court
  which has been allowed vide j!Jdgment and order dated
  18.2.2008 (impugned) only on the ground that the appellant
                                                        1
E could not produce any evidence to establish that he was the
  sole proprietor of the proprietary concern in question. Hence,
  this appeal.

       8. We have heard Shri Shekhar Naphade, learned senior
  counsel for the appellant, Shri Viraj Kadam, learned counsel
F for respondent no.1 and Shri Shankar Chillarge, Additional
  Advocate General for respondent no.2 and perused the record.
        All the three courts below have dealt with the issues -
    elaborately and recorded the following findings of fact:-
G
          (i) The cheque had been issued by the respondent no.1
          in favour of the Firm concerned towards discharge of pre-
          existing liability and not as security.
          (ii) The substantive sentence of imprisonment in default of
H         payment could be imposed.
MILIND SHRIPAD CHANDURKAR v. KALIM M. KHAN 705
         & ANR. [DR. B.S. CHAUHAN, J.]
     So far as the findings on the aforesaid two issues are        A
concerned, the same are not unc!er challenge before us.
Learned counsel appearing for the respondents have accepted
the aforesaid findings.                 -

     9. The only issue involved herein is as to whether the 8
appellant owns the said firm i.e., whether he is the proprietor
of the said firm? The trial Court as well as the Appellate Court
have held that a sole proprietary concern is no independent
legal entity and its identity remains inseparable from its
proprietor. But it merely remains a legal proposition. None of C
the said courts held that the appellant was the sole proprietor
of the. said firm.

    10. The High Court has set asi~e the judgments of the trial
Court as well as the Appellate Court in Revision only. on the
ground that as the appellant did not produce any evidence to        D
show that he was the proprietor of the Firm, he had no locus
standi to file the complaint.
     11. The trial Court held that the complainant had deposed
that he was proprietor of the Firm, namely, "Vijaya Automobiles" E
which had the business of supplying fuel etc. and the Firm had
supplied the fuel on credit to respondent no.1/accused. The
Court also took note of the pleadings taken by the respondent
no.1/accused that he had given the cheque to the appellant for
Vijaya Automobiles but it was as a security and not to meet
any legal liability. Therefore, the respondent no.1/accused had F
admitted that the appellant had actual control over the said firm. ·
The respondent no.1/accused admitted his signature on the
cheque and execution of the cheque. Therefore, the
presumptions under sections 118 and 139 of the Act 1881
were attracted.                                                      G

     12. Dealing with the issue involved herein, the Appellate
Court has noted that perusal of the cross-examination indicated
that the appellant did not produce any documentary evidence
to show that he was the proprietor of Vijaya Automobiles.           H
    706       SUPREME COURT REPORTS                    [2011] 3 S.C.R.

A Rather it was admitted by the appellant in the cross-
  examination that he did not have any documentary evidence to
  show that the complainant was the owner of the petrol pump.

       13. In spite of making the aforesaid observations, the
  appeal was dismissed on the ground that admittedly diesel had
8 been supplied to the respondent no.1/accused, and the said
  respondent had issued the cheque to meet the liability, which
  could not be encashed for want of funds. All other requirements
  in law, i.e., issuance of notice etc. also stood completed.

c      14. Relevant part of the affidavit filed by the appellant/
    complainant before the trial Court reads as under:
          "I, Shri Milind Shripad Chandurkar, Aged about 37 years,
          Indian Inhabitant, Occ. Business, Proprietor of M/s. Vijay
          Automobiles, having address at Sector-29, Dronagiri
D
          Node, Uran, Dist. Raigad, take oath and state on solemn
          affirmation as under.....
          I state that in due discharge of legal liability of the accused
          as mentioned in foregoing paras, the accused issued one
E         cheque dtd. 28.4.2005 in my name i.e. in the Name Mis.
          Vijaya Automobilies which was drawn on Development
          Credit Bank, Kurla Branch, Mumbai-70 bearing Cheque
          No.490592, for Rs.7,00,000/- {Rupees Seven Lakhs only)."

F         Relevant part of his cross-examination reads as under:-
          "lt is true that till today I had not produced any documentary,
          evidence to show that I am owner of Vijaya
          Automobiles ...... Till today I had not produced any
          documentary evidence to support."
G
         15. The complainant had also examined Shri S.K. Sharma,
    owner of Mis. Vikas Travels under whom the respondent no.1
    had been working as a sub-contractor. In his cross-examination,
    Shri S.K. Sharma also stated as under:-
H
 MILIND SHRIPAD CHANDURKAR v. KALIM M. KHAN 707
          & ANR. [DR. S.S. CHAUHAN, J.]
     "I have no documentary evidence to show that complainant         A
     Milind Shripad Chandurkar owns the petrol pump."

       16. Thus, from the above, it is evident that the appellant/
 compla:nant could not produce any document to show that he
 was the proprietor of Vijaya Automobiles in spite of the fact that   8
 the issue had been agitated by the respondent no.1/acGUsed
 at every stage. It is also evident from the documents on record
 that in the list of witnesses the complainant had mentioned the
 name of his banker as a witness, however, the said banker was
 not examined.
                                                                      c
      17. It may also be pertinent to mention here that appellant
 did not make any attempt to adduce additional evidence at the
_appellate stage also. No document has ever been filed to
 substantiate his averment in this regard.
                                                                      D
      18. Section 7 of the Act 1881 defines "Payee" as the
 person named in the instrument, to whom or to whose order
 the money is by the instrument directed to be paid. Section 8
 defines "the holder of the cheque" as any person entitled in his
 own name to.the possession thereof and to receive or recover         E/
 the amount due thereon from the parties thereto. Section 9
 defines "holder in due course" as any person who for
 consideration became the possessor of a cheque if payable
 to a bearer or the payee or endorsee thereof.
      Section 138 provides for penalties in case of dishonour         F·
 of certain cheques for insufficiency of funds in the accounts.
 However, exception contained in clause (c) thereof reads as
 under:

     "The drawer of such cheque fails to make the payment of          G
     the said amount of 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." (Emphasis added)
      19. Section 142 provides for taking cognizance of the
                                                                      H
    708      SUPREME COURT REPORTS                [2011] 3 S.C.R.

A offence notwithstanding anything contained in Cr.P.C. which
  reads as under:

          "(a) no court shall take cognizance of any offence
          punishable under Section 138 except upon a complaint,
          in writing, made by the payee or, as the case may be, the
B
          holder in due course of the cheque." (Emphasis added)

        20. This Court in Shankar Finance and Investments v.
  State of Andhra Pradesh & Ors., (2008) 8 SCC 536, dealt with
  the issue involved herein elaborately and held that where the
C "payee" is a proprietary concern the complaint can be filed (i)
  by the proprietor of the proprietary concern describing himself
  as the sole proprietor of the "payee"; (ii) the proprietary concern
  describing itself as the sole proprietary concern represented
  by its proprietor; and (iii) the proprietor or the proprietary
D concern represented by the Attorney Holder under the power
  of attorney executed by the sole proprietor. However, it shall
  not be permissible for an Attorney Holder to file the complaint
  in his own name as if he was the complainant. He can initiate
  criminal proceedings on behalf of the principal.
E
        In a case of this nature, where the "payee" is a company
  or a sole proprietary concern, such issue cannot be adjudicated
   upon taking any guidance from Section 142 of the Act 1881
   but the case shall be governed by the general law i.e. the
F Companies Act 1956 or by civil law where an individual carries
  on business in the name or style other than his own name. Jn
  such a situation, he can sue in his own name and not in trading ·
   name, though others can sue him in the trading name. So far
   as Section 142 is concerned, a complaint shall be maintainable
   in the name of the "payee", proprietary concern itself or in the
G name of the proprietor of the said concern.
         The Court placing reliance on earlier judgments,
    particularly, in Janki Vashdeo Bhojwani v. lndusind Bank Ltd.,
    (2005) 2 sec 217, held that the general principles of company
· H law or civil law would apply for maintaining the complaint under
 MILIND SHRIPAD CHANDURKAR v. KALIM M. KHAN 709
          & ANR [DR. B.S. CHAUHAN, J.]
Section 138 of the Act 1881.                                       A

    21. In National small Industries Corporation Ltd. v. State
(NCT of Delhi) & Ors., (2009) 1 SCC 407, this Court held as
under:
    "The term "complainant" is not defined under the Code.         8
    Section 142 of the NI Act requires a complaint under
    Section 138 of that Act to be made by the payee (or by
    the holder in due course) .. ."

     22. Thus, in view of the above, the law stands crystallised   C
to the effect that a person can maintain a complaint provided
he is either a "payee" or "holder in due course" of the cheque.

      23. In the instant case, it is evident that the firm, namely,
Vijaya Automobiles, has been the payee and that the appellant
                                                                    0
cannot claim to be the payee of the cheque, nor can he be the
holder in due course, unless he establishes that the cheques
had been issued to him or in his favour or that he is the sole
proprietor of the concern and being so, he could also be payee
himself and thus, entitled to make the complaint. The appellant E
miserably failed to prove any nexus or connection by adducing
any evidence, whatsoever, worth the name with the said firm,
namely, Vijaya Automobiles. Mere statement in the affidavit in
this·regard, is not sufficient to meet the requirement of law. The
appellant failed to produce any documentary evidence to
connect himself with the said firm. It is evident that the firm had F
a substantial amount of business as in one month it sold the
diesel to respondent no. 1 - a single party, for a sum of Rs. 7
lakhs. The appellant would, in addition, have also been carrying
out business with other persons. Thus, a person with such a
big business must have had transactions with the bank and G
must have been a payee of income tax, sales tax etc. Thus, in
such a fact-situation, there would be no dearth of material which
could have been produced by the appellant to show that he was
the sole proprietor of. the said firm. The appellant failed to
adduce any evidence in this regard, nor made any attempt to H
   710       SUPREME COURT REPORTS               [2011) 3 S.C.R.

A adduce any additional evidence at the appellate stage, in spite
  of the fact that the respondent is raising this issue from the
  initiation of the proceedings.
        24. In view of the above, we do not see any cogent reason
  to interfere with the impugned judgment and order of the High
8
  Court. The appeal is devoid of any merit and, accordingly,
  dismissed.

    8.8.8.                                   Appeal dismissed.