Karnataka High Court Rules Proprietor Can File Complaint Under Negotiable Instrument Act

The Karnataka High Court has ruled that when the payee is a proprietary concern, the complaint under Section 138 of the Negotiable Instrument Act, 1881 can be filed by the proprietor of the proprietary concern, describing themselves as the sole proprietor of the payee. This decision was made in a case where a complaint was filed against the petitioner for the dishonour of a cheque, and the Magistrate had taken cognizance of the case. The court observed that a proprietary concern does not have a separate legal existence from its proprietor and therefore, the proprietor can file the complaint on behalf of the concern.

The court further explained that a proprietary concern is not a legal entity like a partnership firm or a company. It does not have to fulfill any legal requirements for establishment, and the proprietor has the authority to close the concern at any time. The proprietor is personally accountable for all consequences and is entitled to all earnings and losses generated by the concern. If the proprietor takes out a loan for the concern, they will be held accountable for any obligations. In case of debts, the proprietor can be sued individually by creditors to recover the debt.

The court cited several landmark judgments, including Vinayak Purshottam Dube through LRs v. Jayashree Padamkar Bhat and Ors. (2024), Raghulakshminarayan v. M/s Fine Tubes (2007), and M/s Shankar Finance and Investments v. State of A.P. and Ors. (2009). In the case of Shankar Finance, it was held that when the payee is a proprietary concern, the complaint can be filed by the proprietor, describing themselves as the sole proprietor of the payee. This can also be done by the proprietary concern itself, represented by its sole proprietor, or by the proprietor or the concern represented by an attorney holder under a power of attorney executed by the sole proprietor.

In conclusion, the Karnataka High Court has clarified that when the payee is a proprietary concern, the proprietor can file a complaint under Section 138 of the Negotiable Instrument Act, 1881, describing themselves as the sole proprietor of the payee. This decision is in line with previous judgments on the matter.