Liability when dishonored cheque was drawn on firm’s a/c for personal debt

[V S]

When a proprietor of a firm draws a cheque on his firm’s bank a/c towards discharge of his personal liability and the cheque gets dishonored,
1. Should the firm be made a necessary accused too along with the proprietor? OR
2. is the proprietor alone liable under NI Act?
In this case, I have made the proprietor alone the accused. If the court feels the firm should have been too made an accused, can I apply to court praying for impleading the firm too as an accused?
NOTE: the complainant had a genuine belief that the proprietor alone is liable as the firm did not have any debt/liability towards him.

[Dr. Ashok Dhamija]

It is a well established principle in law that a proprietorship concern (i.e., having a sole proprietor) and its proprietor are one and the same person. The proprietorship concern has no separate legal existence apart from its proprietor.

Therefore, in my considered view, it should be sufficient to make only the proprietor as the accused. Accused can perhaps be described in the complaint as “Mr. ABC, proprietor of M/s XYZ”.

Here Mr. ABC is the proprietor and M/s XYZ is the name of his proprietorship concern.

I am of the opinion that there may not be a need to make the proprietorship concern as a separate accused.

     

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Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

[V S]

Thanks a lot for your immediate response. Could you sir let me know supreme court’s judgement as to same identity of a proprietor and its firm (proprietorship) as one entity. I was a software engineer. Its been just a year since I have been practicing as an advocate. I need advice and support of a senior lawyer like you. Could I get your contact number please sir? I shall be very grateful.

[Dr. Ashok Dhamija]

You can peruse Section 141 of the NI Act itself. There too, definition of company may include a firm (which implies partnership firm) but not a proprietorship concern. Therefore, there may not be a need to name the proprietorship separately as is required in the case of a company or partnership firm. Search judgments on Section 141 on Google also using the word proprietor, you may get some indirect judgments on this issue, mostly from high courts.     

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Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

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