The Delhi High Court has ruled that in cases involving cheque dishonour under Section 138 of the Negotiable Instruments Act (NI Act), only the sole proprietor of a firm can be held liable. This decision came in a case involving Sanat Kumar, who was summoned alongside Rajiv Kumar, the proprietor of Regal Cruiser Travels, after two cheques issued by Rajiv Kumar were dishonoured.
The case dates back to 2016 when Sanjay Sharma extended a loan of Rs. 25 lakhs to Rajiv Kumar and Sanat Kumar. In repayment, Rajiv issued two post-dated cheques, which were later dishonoured with the remark, "payment stopped by drawer." After the failure of payments, Sharma initiated legal action against both Rajiv and Sanat Kumar. However, Sanat Kumar challenged the summons, stating that Rajiv Kumar, as the sole proprietor, held full responsibility for the cheques.
Justice Subramonium Prasad, presiding over the case, emphasized that in sole proprietorships, only the proprietor can be held accountable for financial liabilities, including dishonoured cheques. The court, after reviewing GST records and legal precedents, quashed the summoning order against Sanat Kumar, ruling that he could not be held liable since he was neither the issuer of the cheques nor the proprietor of the firm. The proceedings against Rajiv Kumar, however, will continue.
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