Karnataka High Court
Shankar S/O Ram Gudimani vs Prakash S/O Shivaj Naik on 5 March, 2025
Author: Shivashankar Amarannavar
Bench: Shivashankar Amarannavar
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NC: 2025:KHC-D:4280
CRL.A No. 100638 of 2022
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 5TH DAY OF MARCH, 2025
BEFORE
THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR
CRIMINAL APPEAL NO.100638 OF 2022
BETWEEN:
SHANKAR S/O. RAM GUDIMANI,
AGE: 60 YEARS, OCC: BUSINESS,
R/O: PROPRIETOR AT
RAGHAVENDRA HOTEL,
BAGALKOT - 587 101.
...APPELLANT
(BY SRI ANAND ASHTEKAR, ADVOCATE)
AND:
PRAKASH S/O. SHIVAJI NAIK,
AGE: 37 YRS, OCC: BUSINESS,
R/O: R. C. CENTER,
SHIRAGUPPI LAMANI TANDA,
TAL: AND DIST: BAGALKOT - 587 119.
...RESPONDENT
(SOLE RESPONDENT IS SERVED BUT UNREPRESENTED)
Digitally signed by
ASHPAK
KASHIMSA THIS CRIMINAL APPEAL IS FILED U/SEC. 378(4) OF
MALAGALADINNI
Location: High CR.P.C., 1973, SEEKING TO SET ASIDE THE JUDGMENT DATED
Court of
Karnataka,
Dharwad Bench,
20.08.2022 PASSED BY THE I ADDITIONAL SENIOR CIVIL
Dharwad
JUDGE AND JMFC, BAGALKOTE AT BAGALKOTE IN C.C.NO.
677/2021 AND CONVICT THE RESPONDENT HEREIN FOR THE
OFFENCE PUNISHABLE UNDER SECTION 138 OF NEGOTIABLE
INSTRUCTION ACT, GRANT SUCH OTHER RELIEFS AS DEEMED
FIT IN THE CIRCUMSTANCES OF THE CASE AND IN THE
INTEREST OF JUSTICE.
THIS CRIMINAL APPEAL, COMING ON FOR FINAL
HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR
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NC: 2025:KHC-D:4280
CRL.A No. 100638 of 2022
ORAL JUDGMENT
This appeal is filed by the appellant/complainant challenging the judgement of acquittal of the respondent/accused dated 20.08.2022 passed by I Additional Senior Civil Judge and JMFC, Bagalkot in C.C.No.677/2021, wherein, respondent-accused has been acquitted for offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as '138 of N.I. Act', for short).
2. The case of the appellant/complainant in brief is as under:
The complainant is running a hotel business at Bagalkot. During the course of hotel business respondent/accused was acquainted with complainant.
In pursuance of such acquaintance, accused availed a loan of Rs.2,25,000/- from the complainant on 23.11.2018 for which a loan document is executed by the accused. But accused did not repay the said loan amount as agreed. On demand made by the -3- NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 complainant, accused has issued a cheque bearing No.167191 for Rs.2,25,000/- drawn on Axis Bank, Bagalkot branch dated 05.02.2019 in favour of the complainant for repayment of the loan amount.
Complainant presented the said cheque for encashment on 05.02.2019. The said cheque came to be returned dishonoured. Thereafter, the complainant has issued legal notice dated 07.02.2019 and it came to be served on the accused on 28.02.2019. Inspite of service of notice, accused did not pay the cheque amount and therefore, appellant/complainant filed private complaint against respondent/accused for offence under Section 138 of N.I. Act.
3. The learned Magistrate has taken cognizance and registered C.C.No.677/2021 against the respondent-accused for offence under Section 138 of N.I. Act. The plea of the accused has been recorded. The appellant-complainant in order to prove his case, has examined himself as P.W-1 and got -4- NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 marked five documents as Exs.C-1 to C-5. The statement of the respondent-accused has been recorded under Section 313 of Cr.P.C. The respondent has not led any defence evidence. The learned Magistrate after hearing the arguments on both sides, has formulated points for consideration and passed impugned judgement of acquittal. The said judgement of acquittal has been challenged by the complainant in this appeal.
4. Heard learned counsel for the appellant. Inspite of service of notice, respondent remained absent and unrepresented.
5. The learned counsel for the appellant would contend that the trial Court has only considered the aspect that the payee is Raghavendra Hotel, Bagalkot and the complaint has been filed by one Sri. Shankar Ram Gudimani and he is not the payee of the cheque. -5-
NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022
6. He further submitted that the trial Court has failed to take into consideration that the complainant is a proprietor of Raghavendra Hotel, Bagalkot and same has been stated in the cause title of the complaint. The trial Court erred in relying upon the decision of Hon'ble Apex Court in the case of National Small Industries Corporation Limited V/s State NACT, Delhi and Others in Criminal Appeal No.1802/2018, wherein, the Hon'ble Apex Court has considered whether company is a necessary party or not. The said decision is not applicable to the case on hand as the appellant/payee is not a company but it is a proprietary firm. He places reliance on the decision of this Court in the case of Shri. Baburao V/s Shri. S.M. Ravindrashetty1, on the point that if payee is the proprietary concern, the proprietor can file complaint while describing as sole proprietor of proprietary concern.
1 MANU/KA/0937/2024 -6- NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022
7. He further submits that the trial Court has not gone into the merits of the case of the appellant. Therefore, the matter requires to be remanded to the trial Court for considering the case of complainant on merits. With this, he prayed to allow the appeal and remand the matter to the trial Court.
8. Having heard learned counsel, this Court has perused impugned judgement and trial Court records. Considering the grounds urged, the following point arise for consideration:
i. Whether the trial Court has erred in acquitting respondent/accused for offence under Section 138 of N.I. Act and whether the matter requires to be remanded to the trial Court?
9. My answer to the above point is in the 'affirmative' for the following reasons:
Ex.C-1 is a cheque issued by respondent-accused in favour of Raghavendra Hotel, Bagalkot. The said -7- NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 cheque has been dishonoured, so the complaint has been filed by one Sri. Shankar Ram Gudimani describing him as the proprietor of Raghavendra Hotel, Bagalkot. The trial Court has observed that complaint has not been filed by Raghavendra Hotel, Bagalkot but it has been filed by Sri. Shankar Ram Gudimani and he is not the payee of the cheque. Considering the said aspect, the trial Court has held that complainant is not having right to file the complaint against the accused in his own name.
10. In the case of Shri. Bahurao V/s Shri.S.M. Ravindrashetty (supra), this Court considering a similar point has answered the point, whether complaint filed by the proprietor is maintainable, if the payee is a proprietary concern, in the 'affirmative' placing reliance on the decision of the Hon'ble Apex Court in the case of Raghu Lakshminarayan V/s M/s Fine Tubes2 and other 2 Reported in AIR 2007 SC 1634 -8- NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 decisions of co-ordinate Bench. In the said decision, it is observed as under:
"10. The proprietary concern is not a legal entity or juristic or legal person unlike partnership firm or company which are created or formed under Indian Partnership Act and Indian Companies Act. There are no legal requirements for establishing a single proprietorship. In other cases, legal formalities are necessary. The owner/ proprietor has the authority to close the firm at any time. The proprietor/owner is personally accountable for all consequences. If he takes out a loan for its firm, he will be held accountable for any obligations. Proprietor is entitled to all earnings and losses generated by the proprietary concern. Sole proprietor is personally accountable for paying any debts if he cannot pay with its revenues. He might be sued individually by creditors to recover the debt.
11. Whether the proprietor is required to be separately arrayed as a party accused in a proceedings under Section 138 of N.I. -9- NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 Act came for consideration before the Co-Ordinate Bench of this Court in the case of H.N Nagaraj Vs. Suresh Lal Hira Lal(supra) whereunder the Co-ordinate Bench held as under
"11.5 Insofar as a proprietary concern is concerned, as the name indicates there can only be one proprietor and it is the said proprietor who would be incharge of the affairs of the proprietary concern. Thus, it is not required for any pleading to be made as regards who is the person in charge of proprietary concern when there is only one proprietor. I am unable to agree with the decision of the Hon'ble Panjab and Haryana High Court in the case of SARDAR BUPENDER SINGH [ CRM-M- 54111/2021] where the definition of a company has been extended to a proprietary concern to contend that the proprietary concern has a separate and independent existence. In my considered opinion a proprietary concern cannot have any independent or separate existence dehors the proprietor thereof."
12. The Co-ordinate Bench further held that in a proceeding under Section 138 of N.I Act, the arraying of a proprietor as an accused or a proprietary concern represented by the proprietor would be sufficient compliance with the requirements under
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NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 Section 138 of N.I. Act, the proprietor and the proprietary concernaries not required to be separately arrayed as a party accused.
13. The Hon'ble Apex Court in the case of Vinayak Purshottam Dube(Deceased) through Lrs Vs Jayashree Padamkar Bhat and Others (supra) while considering jurisprudential status of a proprietary concern has observed as under
"13. In this regard, it is necessary to discuss the jurisprudential status of a proprietary concern. In a report of the Insolvency Law Committee submitted in February, 2020, the definition of 'Proprietorship Firms' reads as under:
"2. DEFINITION OF 'PROPRIETORSHIP FIRMS' 2.2 Proprietorship firms are businesses that are owned, managed and controlled by one person. They are the most common form of businesses in India and are based in unlimited liability of the owner. Legally, a proprietorship is not a separate legal entity and is merely the name under which a proprietor carries on business. [Raghu Lakshminarayanan vs. Fine Tubes (2007) 5 SCC 103.] Due to this, proprietorships are usually not defined in statutes. Though some statutes define proprietorships, such definition is limited to the context of the
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NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 statute. For example, Section 2 (haa) of the Chartered Accountants Act, 1949 defined a 'sole proprietorship' as "an individual who engages himself in practice of accountancy or engages in services...". Notably, 'proprietorship firms' have also not been statutorily defined in many other jurisdictions." [Source: Report of the Insolvency Law Committee, Page No.117-118, Government of India (Ministry of Corporate Affairs, February, 2020).]
14. The Hon'ble Apex Court in the case of Raghulakshminarayan V. M/s Fine Tubes (supra) while considering distinction between partnership firm and a proprietary concern has observed as under
"13. The distinction between partnership firm and a proprietary concern is well known. It is evident from Order XXX Rule 1 and Order XXX Rule 10 of the Code of Civil Procedure. The question came up for consideration also before this Court in Ashok Transport Agency v. Awadhesh Kumar [(1998) 5 SCC 567] wherein this Court stated the law in the following terms :
"6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Partnership Act, 1932. Though a partnership is not a juristic person but Order XXX Rule 1 CPC enables the partners of a partnership firm to sue or to be sued in the name of the firm. A proprietary concern is only the business name in which the
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NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business. In the event of the death of the proprietor of a proprietary concern, it is the legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary business. The provisions of Rule 10 of Order XXX which make applicable the provisions of Order XXX to a proprietary concern, enable the proprietor of a proprietary business to be sued in the business names of his proprietary concern. The real party who is being sued is the proprietor of the said business. The said provision does not have the effect of converting the proprietary business into a partnership firm. The provisions of Rule 4 of Order XXX have no application to such a suit as by virtue of Order XXX Rule 10 the other provisions of Order XXX are applicable to a suit against the proprietor of proprietary business 'insofar as the nature of such case permits'. This means that only those provisions of Order XXX can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case."
15. A similar question where the payee is proprietary concern who can file complaint has came up for consideration before the Hon'ble Apex Court in the case of M/s Shankar Finance and Investments
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NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 v. State of A.P. And Ors (supra) wherein it is observed as under
"8. As contrasted from a company incorporated under the Companies Act, 1956 which is a legal entity distinct from its shareholders, a proprietary concern is not a legal entity distinct from its proprietor. A proprietary concern is nothing but an individual trading under a trade name. In civil law where an individual carries on business in a name or style other than his own name, he cannot sue in the trading name but must sue in his own name, though others can sue him in the trading name. Therefore, if the appellant in this case had to file a civil suit, the proper description of plaintiff should be "Atmakuri Sankara Rao carrying on business under the name and style of M/s Shankar Finance & Investments, a sole proprietary concern". But we are not dealing with a civil suit. We are dealing with a criminal complaint to which the special requirements of Section 142 of the Act apply. Section 142 requires that the complainant should be payee. The payee is M/s Shankar Finance & Investments. Therefore, in a criminal complaint relating to an offence under Section 138 of the Act, it is permissible to lodge the complaint in the name of the proprietary concern itself.
9. The next question is where a proprietary concern carries on business through an attorney holder, whether the attorney holder can lodge the complaint? The attorney holder is the agent of the grantor. When the grantor authorises the attorney holder to initiate legal proceedings and the attorney holder accordingly initiates legal proceedings, he does so as the agent of the grantor and the initiation is by the grantor
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NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 represented by his attorney holder, and not by the attorney holder in his personal capacity. Therefore where the 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 a sole proprietary concern, represented by its sole proprietor; and (iii) the proprietor or the proprietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. It follows that in this case the complaint could have been validly filed by describing the complainant in any one of the following four methods:
"Atmakuri Shankara Rao, sole proprietor of M/s Shankar Finance & Investments"
Or "M/s Shankar Finance & Investments, a sole proprietary concern represented by its proprietor Atmakuri Shankara Rao"
Or "Atmakuri Shankara Rao, sole proprietor of M/s Shankar Finance & Investments, represented by his attorney holder Thamada Satyanarayana"
Or "M/s Shankar Finance & Investments, a proprietary concern of Atmakuri Shankara Rao, represented by his attorney holder Thamada Satyanarayana".
What would have been improper is for the attorney holder Thamada Satyanarayana to file the complaint in his own name as if he was the complainant."
15. Considering the above aspects if payee is the proprietary concern the
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NC: 2025:KHC-D:4280 CRL.A No. 100638 of 2022 proprietor can file complaint while describing as sole proprietor of proprietary concern.
16. In the case on hand, the complaint has been filed by the sole proprietor of Sri Vasavi Traders. Therefore, contention of learned counsel for the petitioner that complaint is not filed by the payee cannot be accepted since proprietary concern and proprietor are inseparable as proprietor is owner of the proprietary concern."
11. In the said decision, this Court has held that if the payee is a proprietary concern, the proprietor can file complaint while describing as a sole proprietor of proprietary concern. In the case on hand also the complaint has been filed by the proprietor describing him as a proprietor of Raghavendra Hotel, Bagalkot. Therefore, the complaint has been filed by the proprietor of Raghavendra Hotel, Bagalkot is maintainable in view of decisions referred supra.
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12. The trial Court has not considered the merits of the case of the complainant as to whether all ingredients of offence under Section 138 of N.I. Act are established or not. Therefore, the matter requires to be remanded to the trial Court to dispose off the case of the appellant on merits in accordance with law, taking into consideration the aforesaid aspects.
13. In the result, the following:
ORDER i. The appeal is allowed.
ii. The impugned judgement dated 20.08.2022 passed by the I Additional Senior Civil Judge and JMFC, Bagalkot in C.C.No.677/2021 is set aside.
iii. The matter is remanded to the trial Court for disposing it on merits in accordance with law.
SD/-
(SHIVASHANKAR AMARANNAVAR) JUDGE RKM/CT-ASC