A partnership firm consisting of only two partners is dissolved by the death of one of them, and the subsequent constitution of a new firm does not make the new partners liable for the acts of the erstwhile firm.

M.L. Mehta, J.

This is an appeal under Section 378(4) of the Cr.PC against the order dated 15.2.2011 passed by learned MM, New Delhi in CC No. 139/1.

2. The appellant herein filed a complaint on 19.5.1997 in the Court of learned MM under Section 138 of the Negotiable Instruments Act ("the Act" for short) against respondent No. 1 M/s. NK Paper Tube Industries and its partner Mr. Krishan Kumar Lohia for dishonor of the cheque dated 29.8.1997 which was signed by the partner Mr. K.K. Lohia for an amount of Rs. 4,08,971/- in favour of the appellant. The cheque got dishonoured on account of instructions of 'stop payment'. In the said complaint, the evidence of the complainant post notice was recorded and the statement of respondent Mr. K.K. Lohia was also recorded. It was brought to the notice of the court that since the partnership consisted of only two partners i.e. Mr. K.K. Lohia and his father Mr. N.K. Lohia, and the later having passed away on 28.2.2001, the partnership stood dissolved. Subsequently, during the pendency of the complaint Mr. K.K. Lohia also died on 19.5.2003. 3. The partnership deed which was executed between Mr. K.K. Lohia and his father Mr. N.K. Lohia on 19.12.1994 had clause (13) which reads as under:-

"On the death or retirement of any partner or for any other reasons, the firm shall be dissolved but shall be carried on by the remaining partners with or without the heirs or successors of the "deceased partner."

4. The factum of death of Mr. N.K. Lohia on 28.2.2001 and that of Mr. K.K. Lohia on 19.5.2003 is not in dispute. It is also not in dispute that the complaint was filed against the firm and Mr. K.K. Lohia who was the signatory of the said cheque. After death of Mr. N.K. Lohia, the business was carried by Mr. K.K. Lohia under the name and style of same firm i.e. N.K. Paper Tube Industries. After his death on 19.5.2003, a new partnership firm under the same name was constituted with respondent No. 2 Mr. Saurabh Lohia and his mother Smt. Manju Devi Lohia by virtue of partnership deed dated 29.5.2003.

5. Vide the impugned order dated 15.2.2011, the learned MM ordered abatement of the proceedings against the firm and also against Mr. Saurabh Lohia. In arriving at this conclusion, the learned MM observed as under :-

"It is thus clear that if a partnership consists of two partners and when one of them dies, the firm is dissolved. If one of the two partners of a firm dies, the firm on the death of one of the partners will come an end. Therefore, in view of the judgment of CIT v. Seth Govindram Sugar Mills (Supra), M/s. N.K Paper Tubes Ltd. i.e accused No. 1 stood dissolved on death of one of the two partners namely Shri N.K. Lohia on 28.2.2001. As mentioned aforesaid, accused No. 2 i.e. Kishan Kumar Lohia had also expired on 19.5.2003.

Therefore, criminal proceedings against accused No. 1 and accused No. 2 cannot be continued in view of dissolution/death. Since the accused No. 1 firm got dissolved on 28.2.2001, therefore, Shri Saurabh Kumar Lohia cannot be said to be representing accused No. 1 when it is no more in existence and by any subsequent constitution of a new partnership firm under the same name i.e. of accused No. 1, it cannot be said that he has stepped into the shoe of AR of accused No. 1."

6. The impugned order has been assailed mainly on the grounds that as per clause 13 the partnership deed, being a legal entity in the eyes of law continue to exist and the proceedings could not abate against it. It has been submitted that the said firm was carrying on the same business at the same premises and so it cannot be said that the partnership firm was distinct and separate from the erstwhile partnership firm and had no role or connection with the earlier firm. It is submitted that the firm M/s NK Paper and Tube Industry took over all the assets and liabilities of the erstwhile firm in letter and spirit of Clause 13 of the earlier partnership deed of 19.12.1994. In view of all this it was submitted tha