The main legal point established in the judgment is that an unregistered partnership firm can maintain a complaint under Section 138 of the NI Act, as clarified by conflicting views of various High Courts and the Supreme Court's interpretation of Section 138 as a penal provision.

1. By the present petition the petitioner seeks quashing of complaint case No. 2009/1 titled as “M/s. Silvermount Vs. Mrs. Rani Kapoor” wherein the petitioner has been summoned as an accused for offence punishable under Section 138 of the Negotiable Instruments Act, 1981 (in short the NI Act) by the learned Metropolitan Magistrate (West), Tis Hazari, Delhi.

2. Allegations in the complaint filed by the respondent are that it is a partnership firm carrying on business of building construction and had entered into a collaboration agreement with the petitioner for reconstruction of property No. 4/16, West Patel Nagar, New Delhi admeasuring 200 sq. yds. approximately. As per the collaboration agreement, the respondent paid a sum of Rs. 25 lakhs as earnest money to the petitioner and the balance amount of Rs. 1.5 crores in two installments. On reconstruction, respondent was entitled to keep the first and second floor with proportionate right in the land underneath whereas the rest of the portion was to continue in the ownership of the petitioner. After execution of the agreement, the petitioner approached the respondent and requested for payment of Rs. 20 lakhs which in any case the respondent was to make later on, hence the same was paid. However, the petitioner with malafide intention avoided handing-over the vacant peaceful possession of the property which was required to be demolished for reconstruction. Finally the dispute was settled, petitioner agreed to repay the amount and a dissolution deed was entered into between the parties. A cheque bearing No.183141 dated 28th May, 2015 for a sum of Rs. 5 lakhs issued in favour of the respondents was returned as dishonoured vide memo dated 29th May, 2015 on account of ‘payment stopped by drawer’. Hence on non-receipt of the payment, respondent issued a notice and filed the complaint under Section 138 NI Act as noted above.

3. Learned counsel for the petitioner submits before this Court that Section 138 NI Act envisages that when a cheque issued in lieu of a legally recoverable debt is dishonoured and on service of notice the money is not paid within 15 days, a complaint is maintainable. The only issue raised by learned counsel for the petitioner challenging issue of summons in the complaint to the petitioner is that admittedly the respondent is an unregistered partnership firm and an unregistered partnership firm is not entitled to enforce its rights through contract as per Section 69 of the Indian Partnership Act. Hence the complaint against the petitioner is not maintainable and is liable to be set aside.

4. On the issue whether an unregistered partnership firm is entitled to maintain a complaint under Section 138 NI Act different views have been expressed by various High Courts. The view expressed by the Division Bench of Kerala High Court & Single Benches of Karnataka High Court and Punjab & Haryana High Court is that irrespective of Section 69(2) of the Indian Partnership Act, a complaint under Section 138 NI Act is maintainable whereas the view taken by the Division Bench of Andhra Pradesh High Court is that the bar under Section 69(2) of the Indian Partnership Act is also applicable to a complaint under Section 138 of the NI Act.

5. In the decision reported as AIR 1975 Ker 144 Kerala Arecanut Stores v. Ramkishore and Sons it was held :

“10. Reference has been made to these provisions to indicate that the obligation of the drawer of a cheque as well as the indorser to the indorsee who is the holder in due course arises by virtue of statutory provisions. It is not as if there is any privity of contract between the maker of a cheque and the holder in due course. Any right of action available to such holder is not under any contract, for he would be a third party to the contract and would not come within one of the exceptions enabling a third party to a contract to sue. But he is entitled to sue on his cheque by reason of the right conferred upon him by the statute. In fact, i