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SUPREME COURT OF INDIA
B.V. NAGARATHNA, SATISH CHANDRA SHARMA, JJ.
Dhanasingh Prabhu - Appellant
Versus
Chandrasekar and Another - Respondents
Criminal Appeal No. of 2025 [Arising Out of Special Leave Petition (Criminal) No. 5706 of 2024]
Decided On : 14-07-2025
Negotiable Instruments Act, 1881 – Sections 138 and 141 – Partnership Act, 1932 – Section 4 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheque – Offence by Partnership Firm – In case of a Partnership Firm, when offence has been proved against a Partnership Firm, firm per se would not be liable, but liability would inevitably extend to partners of firm inasmuch as they would be personally, jointly and severally liable with firm even when offence is committed in name of Partnership Firm – Partners and Partnership Firm are one and same – Such a juristic entity (Partnership Firm) is not distinct from partners who comprise partnership – Partnership Firm in absence of its partners cannot at all be considered to be a juristic entity in law – If complainant has proceeded only against partners and not against Partnership Firm, it is not something which would go to root of matter so as to dismiss complaint on that ground – Opportunity could have been given to complainant to implead Partnership Firm also as an accused in complaint even though no notice was sent specifically in name of Partnership Firm – Cheque was issued in name of firm and signed by one of partners, for and on behalf of other also, as such, liability is deemed to be on both partners of Firm – High Court was not right in dismissing complaint for reason that Partnership Firm was not arraigned as accused in complaint or that notice had not been issued to it under Section 138 of Act – Impugned order of High Court set aside and complaint restored – Trial Court directed to dispose of complaint in accordance with law. (Paras 6.10, 7.9, 7.11, 9.7, 9.10, 10 and 11)
Facts of the case:
Point in issue is: –
“Whether High Court was right in dismissing complaint on the ground that name of Partnership Firm was not mentioned in statutory notice issued by appellant / complainant to respondents under Section 138 of Negotiable Instruments Act, 1881 and was also not arraigned as an accused in complaint filed by appellant / complainant?
Findings of Court:
Offence proved against the firm would amount to partners of firm also being liable jointly and severally with the firm. Therefore, there is no separate liability on each of the partners unless sub section (2) of Section 141 applies, when negligence or lack of bona fides on the part of any individual partner of the firm has been proved.
Result : Appeal allowed.
The legal document discusses the liability of partners in a partnership firm under the context of offences related to dishonour of cheques, specifically under the Negotiable Instruments Act. The key point is that, unlike a corporation which is a separate legal entity, a partnership firm is not a juristic person and does not have an independent legal existence apart from its partners (!) (!) .
When an offence is committed by a partnership firm, the liability extends directly to the partners, who are personally, jointly, and severally liable for the firm’s obligations and offences, even if the firm itself is not formally arraigned or issued a notice as a separate legal entity (!) (!) . The legal framework clarifies that the firm name is merely a collective term for the partners, and the legal responsibility for offences, such as dishonour of cheques, is on the partners themselves (!) (!) .
Furthermore, the law stipulates that in cases involving offences under the Negotiable Instruments Act, if the offence is proved against the firm, the liability automatically extends to the partners, who are deemed to be in charge of and responsible for the conduct of the business at the time of the offence (!) . The document emphasizes that the partners and the firm are essentially the same in law, and liability is joint and several, not vicarious, which means that proceedings against partners are sufficient even if the firm itself is not separately arraigned or issued a notice (!) (!) .
In the specific case discussed, the court held that even if the offence is committed by the firm, the partners are personally liable, and proceedings against them are valid without the firm being separately named or issued a notice, as the firm is only a collective term for the partners (!) (!) . The court also clarified that the legal fiction used to include a partnership within the definition of a company in certain statutes is for legislative convenience and does not imply that a partnership has a separate legal personality like a corporation (!) (!) .
Overall, the document underscores that in the context of criminal liability for cheque dishonour, the partners are directly liable, and the law does not require the firm to be treated as a separate legal entity in such proceedings. The proceedings against the partners alone are sufficient to establish and enforce liability under the relevant statutes (!) (!) .
| Table of Content |
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| 1. \"factual (Para 2) |
| 2. \ (Para 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 3. \"conclusion (Para 10 , 11 , 12) |
JUDGMENT :
B.V. NAGARATHNA, J.
1. Leave granted.
Factual Background:
2. Appellant has preferred the present criminal appeal being aggrieved by the final judgment and order of the Madras High Court dated 26.02.2024, whereby the High Court allowed the Criminal Original Petition No. 1533/2024 preferred by the respondents-accused and thereby quashed Complaint bearing STC No. 1106/2022 filed by the appellant-complainant under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter “the Act”, for the sake of brevity) against the respondents.
2.1 By virtue of a partnership deed, respondent Nos.1 and 2 are partners in the partnership firm ‘Mouriya Coirs’ and are engaged in manufacturing and allied activities of coir products in Periyamamarthupatti, Thenkumarapalayam Post, Pollachi, Tamil Nadu.
2.2 From March 2019 to August 2019, the appellant, through banking channels as well as by cash, advanced a loan of Rs. 21,00,000/- (Rupees Twenty-One Lakhs) to the respondents for business purposes. In order to discharge the debt, on 01.02.2021, respondent No. 1-accused issued Cheque No. 802077 for Rs. 21,00,000/- (Rupees Twenty-one Lakhs) in favour of the appellant-complainant from Account No. 4393002100113025 maintained at Punjab National Bank, New Scheme Road, Pollachi, in the name of the partnership firm. Notably, the cheque issued in the name of the firm was signed only by respondent No. 1. However, upon presentation of the said cheque on 02.02.2021, it was returned as dishonoured vide cheque return memo by noting that the partnership firm’s account has been frozen.
2.3 As required under Section 138 of the Act, the appellant-complainant issued a statutory notice to the respondents on 01.03.2021 demanding discharge of the legally enforceable debt within fifteen days. Subsequently on 23.04.2021, the appellant-complainant filed complaint bearing STC No. 1106/2022 before the Court of the Judicial Magistrate No. II, Pollachi (hereinafter “trial Court”) contending that the respondents have committed offences under Section 138 read with Section 142 of the Act.
2.4 Our attention has been drawn to the uncontested fact that neither was the statutory notice issued to the partnership firm nor was the firm arraigned as an accused in the complaint. Instead, the statutory notice and the complaint mentioned the names of both the respondents who are the partners to the said firm.
2.5 During the pendency of the complaint, the respondents preferred Criminal Original Petition being Crl. O.P. No 1533/2024 under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter “Cr.P.C.”) before the High Court to quash the complaint in STC No. 1106 of 2022 pending on the file of the trial Court. By the impugned order dated 26.02.2024, the High Court allowed the Criminal Original Petition and proceeded to quash the complaint in STC No. 1106 of 2022 on the ground that while the cheque was issued on behalf of the partnership firm, no statutory notice was issued to the partnership firm and it was also not arraigned as an accused in the complaint. Therefore, according to the High Court, as the rigours of Section 141 of the Act were not complied with, the complaint was not maintainable as against both the respondents, who were merely partners in the firm. Hence, the complaint was quashed.
2.6 Being aggrieved, the appellant/complainant has preferred this appeal.
Submissions:
3. Learned counsel for the appellant made the following submissions to differentiate a partnership firm from other entities with limited liability, such as a company, to support his contention that the partners of a partnership firm are liable to be prosecuted individually sans the partnership firm being arraigned as an accused or being issued notice under Section 138 of the Act or as required under Section 141 of the Act, in the following manner:
(i) Firstly, he submitted that unlike a co
Dishonour of cheque – Offence by Partnership Firm – When offence has been proved against a Partnership Firm, firm per se would not be liable, but liability would inevitably extend to partners of firm....
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Partners in a partnership firm are jointly and severally liable under the Negotiable Instruments Act for dishonoured cheques, and mere designation does not incur liability without stated managerial i....
Partners of a firm are jointly and severally liable for cheque dishonor under the Negotiable Instruments Act, irrespective of whether a partner has formally resigned, as long as they were part of the....
Prosecution against a partner of a partnership firm under Section 138 of the N.I. Act is not maintainable without including the firm as an accused, affirming the principle of vicarious liability.
There is a presumption under Section 139 of the N.I.Act that there exists a legally enforceable debt or liability.
A complaint under the Negotiable Instruments Act is not maintainable if the partnership firm is not made a party, as individual partners cannot be liable without arraigning the firm as a principal ac....
Criminal proceedings under Section 138 of the N.I. Act require the partnership firm to be arraigned as an accused; failure to do so renders the proceedings against individual partners not maintainabl....
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