Section 138 NI Act Complaint Maintainable Against Sole Proprietor Without Separately Arraigning Proprietary Concern; Aneeta Hada Rule Inapplicable: Punjab and Haryana High Court

Case Name: Satpal Singh v. Rakesh Kumar

Date of Judgment: 17 August 2026

Citation: CRM-M-7930-2024

Bench: Hon’ble Mr. Justice Virinder Aggarwal

Held: The Punjab and Haryana High Court held that a complaint under Section 138 of the Negotiable Instruments Act, 1881, is maintainable against the sole proprietor without separately impleading the proprietary concern as an accused because a sole proprietorship has no legal identity independent of its proprietor. A proprietary concern is neither a company, partnership firm nor an association of individuals within the meaning of the Explanation to Section 141 of the NI Act; rather, its trade name is merely the business nomenclature under which the proprietor conducts business. Therefore, the proprietor and the proprietary concern are one and the same person in the eyes of law, and the proprietor is prosecuted as the drawer of the cheque and not on the basis of vicarious liability for an offence committed by a separate entity. The rule laid down in Aneeta Hada v. Godfather Travels & Tours (P) Ltd., requiring arraignment of the principal offender, applies where the principal offender is a distinct legal entity such as a company and another person is sought to be made vicariously liable under Section 141; it cannot be mechanically extended to a sole proprietorship.

Summary: The petitioner approached the Punjab and Haryana High Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking quashing of Complaint No. NACT-830-2020, the summoning order, the original and amended notices of accusation and all consequential proceedings instituted against him under Section 138 of the Negotiable Instruments Act.

The respondent-complainant carried on business under the name of M/s Rakesh Trading Company, while the petitioner conducted business as the proprietor of M/s Anmol Pesticides. The petitioner allegedly purchased pesticides, seeds and other agricultural products from the complainant in the ordinary course of business, resulting in an outstanding liability. In purported discharge of that liability, cheque No. 000153 dated 5 September 2020 for ₹8,60,000 was issued in favour of the complainant from the bank account of M/s Anmol Pesticides.

Upon presentation, the cheque was dishonoured for “Funds Insufficient.” The complainant issued the statutory demand notice, but the amount remained unpaid within the prescribed period. Consequently, a complaint under Section 138 of the NI Act was instituted, following which the trial court summoned the petitioner and subsequently served and amended the notice of accusation against him.

The petitioner sought quashing primarily on the ground that the cheque had been issued from an account maintained in the name of M/s Anmol Pesticides, whereas the complaint had been filed against Satpal Singh in his individual capacity without separately arraigning M/s Anmol Pesticides as an accused. Relying upon Aneeta Hada v. Godfather Travels & Tours (P) Ltd., Anil Gupta v. Star India Pvt. Ltd. and Himanshu v. B. Shivamurthy, the petitioner argued that prosecution of a person sought to be made liable could not continue unless the principal offender was also prosecuted.

The complainant opposed the petition by contending that M/s Anmol Pesticides was a sole proprietary concern of the petitioner and did not possess a legal identity independent of him. Therefore, there was no legal requirement to separately implead the trade name when the proprietor himself, being the drawer of the cheque and the person responsible for the business, had already been arraigned as an accused.

The High Court examined the statutory scheme of Sections 138 and 141 of the NI Act. It observed that liability under Section 138 ordinarily falls upon the drawer of the dishonoured cheque. Section 141 creates an exception to the general rule that criminal liability is personal by imposing statutory vicarious liability upon persons in charge of and responsible for the business of a company that commits an offence under Section 138.

The Court explained that the expression “company” under the Explanation to Section 141 includes a body corporate, firm or other association of individuals. A company possesses a juristic identity distinct from its directors and officers, while a partnership firm or association necessarily involves a plurality of persons. A sole proprietorship, however, is owned and conducted by only one individual and is not an association of persons. It cannot possess rights, incur liabilities or bear criminal responsibility independently of its proprietor.

The Court further observed that using a business name or maintaining a bank account in the name of the proprietary concern does not confer an independent juristic personality upon it. In law, there are not two distinct persons—the proprietor and the concern—but only one individual carrying on business under a chosen trade name. Consequently, liabilities arising from the business are the personal liabilities of the proprietor.

Distinguishing Aneeta Hada, the Court held that its requirement of arraigning the principal offender presupposes the existence of a legal entity separate from the natural person sought to be made vicariously liable. Where the offender is a company, the company must be prosecuted because its directors or officers are made vicariously liable for its acts under Section 141. That reasoning does not apply to a sole proprietorship because the concern and its proprietor are legally indistinguishable.

The record described the petitioner as “Satpal Singh, Proprietor of M/s Anmol Pesticides,” and the notice of accusation similarly identified him as the proprietor of the concern. No material indicated that M/s Anmol Pesticides was a company, partnership firm or association of individuals. Therefore, the petitioner was being prosecuted as the proprietor and drawer of the cheque, not as a person vicariously liable for an offence committed by a separate legal entity.

The High Court also reiterated that the inherent power under Section 482 Cr.P.C. is extraordinary and must be exercised sparingly. Since the complaint contained the necessary foundational allegations concerning issuance of the cheque, its dishonour and failure to pay despite service of the statutory notice, and the petitioner’s sole legal objection was found to be untenable, no abuse of process or exceptional circumstance warranting quashing was established.

Decision: The Punjab and Haryana High Court dismissed the petition and upheld Complaint No. NACT-830-2020, the summoning order and all consequential proceedings. The Court held that the failure to separately arraign M/s Anmol Pesticides did not affect the maintainability of the complaint because it was the petitioner’s sole proprietary concern and had no legal existence distinct from him.