When the court should not quash prosecution against partner of a firm in a complaint for dishonour of cheque?

 The specific allegations made against the Accused in the complaint, including the Respondent No. 1, were that they were in-charge of and were responsible for the affairs of the Respondent No. 3 firm, for conduct of the business affairs of the firm. Thus, they were liable to be proceeded against and punished. The offence has been committed with the consent and connivance of the Accused Nos. 2 to 4, which included the Respondent No. 1.{Para 18}

19. The High Court had accepted the argument raised by the Respondent No. 1 and quashed the summoning order as well as the complaints against him, accepting the plea that he had retired from the partnership firm for which a Retirement Deed was already executed on 01.04.2018. In our opinion, the plea taken by the Respondent No. 1 seeking quashing of the summoning order and the complaints filed against him was not tenable, for the reason that, it would be a matter of evidence to be proved before the trial Court, as to whether any Retirement Deed was issued and a public notice concerning the same was issued, before the complaints were filed. The fact remains that, a public notice regarding retirement by the Respondent No. 1 from the firm was issued on 09.02.2022 i.e., much after the complaints had been filed and the summoning order had been issued by the trial Court on 05.02.2020. Even the quashing petitions were filed by the Respondent No. 1 in October 2021. The public notice was issued few days before the High Court decided the quashing petition on 14.03.2022. It is not the case set up by the Respondent No. 1 that in the Partnership Deed it is mentioned that he was a sleeping partner in the firm. Under such circumstances, the Retirement Deed dated 01.04.2018 sought to be produced by the Respondent No. 1 for quashing of the summoning order and the complaints could not be taken on its face value, and treated as clinching evidence to quash the complaints. It would be a matter of evidence to be led before the trial Court.

20. It is well settled that the final judgment of the trial Court will depend on the evidence adduced before it. As there are specific allegations against the Respondent No. 1 in the complaint and he was admittedly a partner in the partnership firm when the rent deed was executed, he is liable to face prosecution. Powers Under Section 482 of the Code can be exercised by the High Court in case when it comes across unimpeachable and incontrovertible evidence to indicate that the partner of the firm did not have any concern with the issuance of cheques. The case in hand is not of that kind.

IN THE SUPREME COURT OF INDIA

Criminal Appeal Nos. 2510-2552 of 2023.

Decided On: 23.08.2023

Riya Bawri and Ors. Vs. Mark Alexander Davidson and Ors.

Hon'ble Judges/Coram:

Hima Kohli and Rajesh Bindal, JJ.

Author: Rajesh Bindal, J.

Citation:  MANU/SC/0918/2023,2023/INSC/757.

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Can a person be held liable for offence of dishonour of cheque if he was partner of firm that had taken loan or a he was guarantor for the loan?

  It is an admitted case of the respondent Bank that the appellant had not issued any of the three cheques, which had been dishonoured, in his personal capacity or otherwise as a partner. In the absence of any evidence led by the prosecution to show and establish that the appellant was in charge of and responsible for the conduct of the affairs of the firm, an expression interpreted by this Court in Girdhari Lal Gupta v. D.H. Mehta and Another11 to mean ‘a person in overall control of the day-to-day business of the company or the firm’, the conviction of the appellant has to be set aside.{ State of Karnataka v. Pratap Chand and Others, (1981) 2 SCC 335.} The appellant cannot be convicted merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. The Partnership Act, 1932 creates civil liability. Further, the guarantor's liability under the Indian Contract Act, 1872 is a civil liability. The appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened because of the civil liability. Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day to-day business of the company or firm. Vicarious liability under sub-section (2) to Section 141 of the NI Act can arise because of the director, manager, secretary, or other officer's personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day-to-day business of the company when the offence was committed. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company. {Para 11}

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

AJAY RASTOGI; SANJIV KHANNA, JJ.

CRIMINAL APPEAL NO. 767 OF 2022 

DILIP HARIRAMANI Vs BANK OF BARODA

Author: SANJIV KHANNA, J.

Dated: MAY 09, 2022

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Whether the retirement of one partner amounts to the dissolution of the partnership firm if it consists of only two partners?

There is a clear distinction between ‘retirement of a partner’ and

‘dissolution of a partnership firm’. On retirement of the partner, the

reconstituted firm continues and the retiring partner is to be paid

his dues in terms of Section 37 of the Partnership Act. In case of

dissolution, accounts have to be settled and distributed as per the

mode prescribed in Section 48 of the Partnership Act. When the

partners agree to dissolve a partnership, it is a case of dissolution

and not retirement [See – Pamuru Vishnu Vinodh Reddy v.

Chillakuru Chandrasekhara Reddy and Others, (2003) 3 SCC

445]. In the present case, there being only two partners, the

partnership firm could not have continued to carry on business as

the firm. A partnership firm must have at least two partners. When

there are only two partners and one has agreed to retire, then the

retirement amounts to dissolution of the firm [See – Erach F.D.

Mehta v. Minoo F.D. Mehta, (1970) 2 SCC 724].

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6659-6660 OF 2010

GURU NANAK INDUSTRIES, FARIDABAD Vs AMAR SINGH

SANJIV KHANNA, J.

Dated:MAY 26, 2020.

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Whether injunction suit filed by successor of tenant partnership firm to restrain landlord from executing eviction decree is maintainable?

 Suit seeking an injunction against a defendant from interfering with possession of the plaintiff cannot seek to interject the enforcement of an ejectment decree obtained by the defendant against the predecessor-in-interest of the plaintiff, and the correct remedy in this regard for the plaintiff would be to approach the executing court under Order XXI Rules 98 to 105 of the CPC.

A perusal of order dated 6th December, 2018 in the second suit filed by the defendant no. 1 against the defendant no. 2 Economics Transport Organisation (Q.T.S.) Pvt. Ltd. only, for ejectment from the premises, shows a decree for ejectment to have been passed in favour of the defendant no. 1 and against the defendant no. 2. The defendant no. 1 has also filed before this Court a copy of the order dated 11th February, 2019 of this Court, in RFA No. 123/2019 preferred by the defendant no. 2 against the order dated 6th December, 2018 of ejectment and a perusal of which shows the said Economics Transport Organisation (Q.T.S.) Pvt. Ltd. to have withdrawn the appeal and only sought time to vacate the premises on or before 15th May, 2019 and which was granted subject to the defendant no. 2 Economics Transport Organisation (Q.T.S.) Pvt. Ltd. filing an undertaking in this Court and which undertaking was filed in the form of affidavit of Bhimsen Saini, Attorney of Economics Transport Organisation (Q.T.S.) Pvt. Ltd.

13. The counsel for the defendant no. 1 states that the defendant no. 2 Economics Transport Organisation (Q.T.S.) Pvt. Ltd. has not vacated the premises and on the contrary made an application to wriggle out of the undertaking given and which application has been dismissed. It is further stated that the defendant no. 1 has already initiated contempt proceedings against the defendant no. 2 Economics Transport Organisation (Q.T.S.) Pvt. Ltd. and Mr. Bhimsen Saini aforesaid and which are pending.

14. I have hereinabove observed that the suit, on the face of it did not lie. What the plaintiff, by instituting this suit is seeking to do, is to assert independent right to be not removed from possession of the premises aforesaid in execution of the ejectment decree obtained by the defendant no. 1 against the defendant no. 2 in the second suit aforesaid and in which plaintiff was not a party. The relief of permanent injunction sought by the plaintiff, of restraining the defendants from interfering with possession of the plaintiff of the premises, cannot be to restrain the defendant no. 1 from, in execution of the said ejectment decree, dispossessing the plaintiff from the premises.

15. The remedy of the plaintiff, if claims to be not entitled to be dispossessed in execution of the decree obtained by defendant no. 1 against defendant no. 2, is under Order XXI Rules 98 to 105 of the CPC read with Section 47 of the CPC which bars a separate suit being filed there for.

IN THE HIGH COURT OF DELHI

CS (OS) 312/2019, IA No. 8464/2019 (u/O. XI R-12 CPC) and IA No. 11637/2019 (u/O. VII R. 11 CPC)

Decided On: 12.02.2020

Economics Transport Organisation Ltd. Vs.  Mohan Investments & Properties Pvt. Ltd. and Ors.

Hon'ble Judges/Coram:

Rajiv Sahai Endlaw, J.

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Whether Individual Partner Can Claim Eviction On Bonafide Need Ground For His Occupation Of Building Owned By Partnership Firm?

 We have no hesitation to negative the claim by a firm,

seeking eviction of a tenant from a building owned by the partnership

firm, on the ground of bonafide need of an individual partner when

his/her claim is that he/she wanted to occupy the building for personal

use. We find it impossible to stretch the law under Section 11(3) of the

Act to hold that occupation by such a partner will amount to own

occupation by the landlord, as he/she individually cannot be regarded

as the landlord as long as the building remains in the ownership of the

firm. We have already mentioned the distinctions between a partner

and a co-owner. Once we find that the building belongs to a firm, the

rights and obligations of the partners are governed by the terms of the

contract and in the absence of any provisions in the contract, they shall

be guided by the Partnership Act. Finding that the building belongs to a

partnership firm cuts at the root of the claim by an individual partner for

own occupation since he/she ceases to be a landlord. In other words,

no partner individually can claim to be a landlord when the firm owns

the building. Hence, one partner cannot claim eviction on the ground of

bonafide need for his/her own occupation of the building. Clear wording

in Section 11(3) of the Act would show that a landlord alone can claim

eviction on the ground of bonafide need of a building for his own

occupation. Since the individual partner cannot be regarded as landlord

in respect of a building owned by a firm, the provision does not apply in

such a case. Corollary is that in such a situation Section 11(3) of the

Act can be invoked by a firm only when the firm itself bonafide needs to

occupy the tenanted premises. 

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT

 MR. JUSTICE A.HARIPRASAD

&

 MR.JUSTICE T.V.ANILKUMAR

RCRev. No.228 OF 2018

AMEER, MAMMUNHI HAJI,  Vs M/S.B.AMOO AND BROTHERS,

Dated this the 15th day of October, 2019

COMMON ORDER

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Whether service of arbitral award on wife of partner of partnership firm is proper service?

It is the admitted position that the signed arbitral awards were forwarded by the arbitrator to the appropriate address of a partner of the appellant firm. The Single Bench noticed that the agreements had been executed by such partner of the firm and the signature of such partner appeared on all pages of the agreement. Once a postal article addressed to a partner of a firm is received at such appropriate address and acknowledged to be received on behalf of the addressee, by his wife no less, service would be deemed to have been appropriately effected on the addressee. Of course, it is open to the addressee to demonstrate otherwise; but the burden is on the addressee. The mere allegation that despite service being effected in such manner, the postal article was not received by the addressee, would not do. It does not appear to be the addressee's case that the wife deliberately suppressed the receipt of such postal article from the relevant partner or there were some other circumstances which prevented the wife from making over the postal article to the relevant partner. In the absence of a very high case and which is established by cogent evidence, in such a scenario, the delivery of the postal article at the appropriate postal address of the addressee would amount to service of the postal article on the addressee. It is, thus, evident that Section 31(5) of the Act was complied with in either case upon the signed copy of the arbitral awards being delivered at the address of the relevant partner.

IN THE HIGH COURT OF CALCUTTA

APO No. 247 of 2018, 

Decided On: 04.10.2018

 Manohar Lal & Co. Vs. Axis Bank Ltd.

Hon'ble Judges/Coram:

Sanjib Banerjee and Abhijit Gangopadhyay, JJ.

Citation: AIR 2019 Cal 84

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Whether application for appointment of arbitrator by partner of dissolved partnership firm is maintainable?

 The appellants (defendants) on being served
raised a preliminary objection contending therein
that since the partnership in question on which the
application under Section 20 of the Partnership Act
was founded was an “unregistered partnership",
therefore, in the light of the bar contained under
Section 69 (3) of the Partnership Act, the application

filed by the respondent was not maintainable,
therefore, it was liable to be dismissed as such.
8. The Civil Judge by order dated 18.03.1993
overruled the objection raised by the appellants
(defendants) and held that the application filed by
the respondent (plaintiff) is maintainable. The
appellants (defendants) felt aggrieved and filed writ
petition in the High Court at Allahabad under
Article 227 of the Constitution of India.
9. By impugned order, the High Court dismissed
the writ petition and upheld the order of the Civil
Judge, which has given rise to filing of this appeal
by way of special leave by the defendants in this
Court.
10. So, the short question, which arises for
consideration in this appeal, is whether the High
Court was justified in dismissing the appellants’
writ petition.

11. Having heard the learned counsel for the
parties and on perusal of the record of the case, we
are inclined to allow this appeal and while setting
aside the impugned order remand the case to the
High Court for deciding the writ petition afresh on
merits in the light of the observations made infra.
12. In our considered view, the need to remand
the case has occasioned because we find that the
High Court did not decide the issue, which was the
subject matter of the writ petition, keeping in view
the law laid down by this Court in the case of
Krishna Motor Service by its Partners vs. H.B.
Vittala Kamath, 1996 (10) SCC 88.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.3399 OF 2019
(Arising out of S.L.P.(C) No.21469 of 2012)

Bhagwan Das Goel Vs Pyare Kishan Agarwal 

Abhay Manohar Sapre, J.
Dated:April 04, 2019.

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Whether partnership firm will become tenant if tenancy agreement is with its one partner?

 It has been claimed by respondent No. 1 that there was a oral tenancy that had come to existence between the appellant and the aforesaid partnership firm of which the said Pramod Mahure and the respondent No. 1 were partners. In order to support the said assertion, respondent No. 1 has heavily relied upon the fact that the deposit of the amount of Rs. 40,0000/- for the said suit shop was paid from the joint account of Pramod Mahure and respondent No. 1, as also the fact that cheques towards monthly rent were paid to the appellant from the account of the partnership firm. It is the contention of the learned Counsel appearing on behalf of respondent No. 1 that these circumstances proved the fact that an oral tenancy had come into existence in favour of the said partnership firm.

18. In this regard, reliance placed by the learned Counsel appearing on behalf of the appellant on the judgment of the Hon'ble Supreme Court in the case of Hiralal (supra) is justified. In the said judgment, the Hon'ble Supreme Court has held as follows;

"7. We are inclined to agree with this submission of the landlord. The initial tenancy was only an oral tenancy. Nevertheless there were two witnesses who deposed that the original tenancy agreement was only between the petitioner and the respondent. At that time, admittedly, there was no question of Balkunj being the tenant in respect of any portion of the premises. All that the respondent says is that subsequently cheques were being issued in the name of Balkunj also and that this must be taken to lead to an inference that the petitioner had accepted Balkunj as its tenant. It is very difficult to accept this argument. It is no doubt true that the rent has been paid by two cheques since November 1976 but the mere payment of rent by two cheques, in the circumstances of this case, cannot mean that there were two tenancies. The landlord was entitled to a rent of Rs. 600 p.m. and so long as he got this amount, it was immaterial for him whether the amount was paid in a lumpsum or by one cheque or more than one cheque and who the makers of the cheques were. It is not unusual to come across cases where a tenant pays rent not by a cheque drawn by himself but by a cheque drawn by some other concern in which he has an interest such as a partnership concern, a limited company of other entity in which he is interested. So, the mere fact that for some reasons the respondent chose not to issue a single cheque for the rent of Rs. 600/- but that he gave two separate cheques, one for Rs. 250/- drawn by himself and one for Rs. 350/- drawn in the name of Balkunj cannot lead to an irresistible conclusion that the tenancy was created in favour of Balkunj with the concurrence of the landlord. the letter dated 26-11-78 far from "clinching" the respondent's claim, as held by the High Court, does not in our view improve the tenant's case at all. It only evidences the fact that the landlord was receiving the cheques issued in the name of the trust in discharge of the respondent's obligation to pay the rent of Rs. 600 p.m. It is also true that, since the landlord was also occupying a part of the ground floor premises, he might have been aware that certain activities of Balkunj were being carried on in the hall. But this can only mean that the landlord permitted the tenant to use a portion of the premises let out for running the activities of the trust. even assuming that, standing by themselves these two facts might have been sufficient to draw any such inference as is suggested, the two letters of 5-8-77 and 15-1-78 place the matter beyond all doubt. the landlord categorically asserted in these letters that he does not recognize Balkunj as his tenant and that the respondent alone was his tenant. There was no reply to these letters for the respondent. In these circumstances, there can be no doubt at all that the premises had been let out only to the respondent by the petitioner and that Balkunj cannot be considered to be a tenant of the premises or any portion thereof."

19. Thus, it would be evident that merely because cheques towards rent were paid from the account of the partnership firm, it would not lead to the conclusion that the said firm became the tenant of the appellant. The position of law laid down in the aforesaid judgment also answers the contention raised on behalf of respondent No. 1 that since the appellant was aware that business of partnership firm was being conducted from the suit shop, it was the firm which was the tenant. No such conclusion could be drawn from the facts and circumstances of the case and therefore, the theory of oral tenancy created in favour of the partnership firm raised on behalf of respondent No. 1 is unsustainable and it is not supported by the evidence and material on record.

20. The circumstances that point towards the fact that tenancy was indeed created only in the name of Pramod Mahure are; the aforesaid agreement dated 01-04-1991 (Exhibit-53) shows that the tenancy was created in the name of Pramod Mahure individually, the respondent Nos. 2 to 4 categorically took a stand that tenancy was in the name of Pramod Mahure and that they specifically stated in their written statement of having surrendered their rights in respect of the tenancy, respondent No. 1 failed to produce a single rent receipt in the name of the partnership firm, the appellant promptly sent reply denying the claim made by respondent No. 1 in his notice about tenancy being in favour of the partnership firm and the appellant returned all the cheques towards rent sought to be deposited by respondent No. 1 on the basis that the tenancy was created in favour of the partnership firm. All these circumstances clearly indicated that the tenancy was created only in favour of Pramod Mahure and that the claims of oral tenancy made by respondent No. 1 in respect of the partnership firm, were wholly unsustainable. The findings rendered by the appellate Court while reversing the decree granted by the trial Court, are found to be perverse and they are based on erroneous appreciation of the evidence and material on record, as also the law applicable to the same.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Second Appeal No. 79 of 2008

Decided On: 10.04.2018

 Chandrasen Gulabchand Shah  Vs.  Ganesh Shrawanji Iche and Ors.

Hon'ble Judges/Coram:

Manish Pitale, J.

Citation: 2018(6) MHLJ 152

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Whether partnership firm can be continued after death of one of partner?

 Section 37 of the Act provides that if any member of a firm dies and the surviving partners carry on the business without any final settlement of accounts, the estate of the deceased partner is entitled to such share of the profits made as may be attributable to his share of the property or to interest @ 6% per annum on the amount of his share in the property of the firm. In our considered opinion, it will have no application in the facts of the case in view of Clause 14 of the partnership deed, which also provides for the manner of calculating the dues. Similarly, Section 42(c) of the Act, providing for dissolution of the firm on the death of a partner, will also have no application in view of the aforesaid Clause evincing a clear intention to continue the partnership on the death of a partner.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2597 of 2016

Decided On: 04.10.2017

Kodendera K. Uthaiah (D) by LR. Vs. P.M. Medappa and Ors.

Hon'ble Judges/Coram:

Ranjan Gogoi and Navin Sinha, JJ.

Citation: (2017) 16 SCC 331

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Whether it is necessary to bring on record legal heirs of retired partner of partnership firm?

The Suit is instituted by the plaintiff against the heirs and legal

representatives, if any, of i) Jamnadas Jinabai Popat and (ii) Manilal Virji

Mehta. The Suit instituted against unknown heirs and legal representatives

itself, is not maintainable. In support of this submission, he invited my

attention to Order 22, Rule 4 and 4-A of the C.P.C. He relied upon the

decision of the learned Single Judge of this Court in the case of Donald

Gonsalves Vs. Penha de Franca Youth Club, 2002 (3) ALL MR 814.

 On the other hand, Mr. Dhakephalkar supported the impugned

orders. He invited my attention to the written statement filed on behalf of

the defendants and it is to the following effect:

“Written statement of heirs and legal representatives of Manilal

Virji Mehta defendant No.1(2), defendant No.2 and defendant

No.3.”

6. He also invited my attention to the affidavit of Virendra Kishorlal

Mehta, partner of M/s. National Traders. The affidavit of examination-inchief

was filed on behalf of the heirs of Manilal Virji Mehta and on behalf

of defendant Nos.2 and 3. He submitted that Jamnadas Jinabai Popat and

Manilal Virji Mehta were joint tenants in respect of the suit premises. They

had formed a partnership firm namely J. M. Electricals. On 19.07.1975,

Jamnadas Popat retired and renounced his rights as joint tenant from the

suit premises. On 30.07.1975, Manilal Mehta started a new firm by name

National Traders with Virendra Mehta. In May 1977, Manilal Mehta also

retired from National Traders and Virendra Mehta and his brothers

continued the business. On 01.04.1981, Virendra Mehta and one Rajul

opened new firm by name Alka Industries (defendant No.3).

7. Mr. Dhakephalkar also invited my attention to the paragraph 3 of the

affidavit of Virendra Mehta wherein he deposed that Jamnadas Popat retired

from the partnership in 1975 (there is a typographical error to the effect that

Manilal Virji Mehta retired from the partnership in 1975). The deed of

retirement dated 19.07.1975 executed by and between Jamnadas Popat,

Bharatkumar Jamndas Popat as continuing partners and Manilal Virji Mehta

as retiring partner was produced on record. In other words, Mr.

Dhakephalkar submitted that from 19.07.1975, Jamnadas retired from the

partnership and also renounced his rights as a joint tenant of the suit

premises. He, therefore, submitted that the submission that the Suit was

instituted against the unknown heirs and legal representatives of Jamnadas

Popat and Manilal Mehta does not merit any consideration.

IN THE HIGH COURT OF JUDICATURE AT MUMBAI

CIVIL APPELLATE JURISDICTION

CIVIL REVISION APPLICATION NO.255 OF 2013

Virendra Kishorlal Mehta and others  Vs. Keshavsingh Dwarkadas Kapadia and others 

CORAM : R. G. KETKAR, J.

DATE : 27TH AUGUST, 2013

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Whether partnership firm can be treated as defaulter if one of its partner is defaulter?

According to Respondents the High Court has correctly decided the law that a partnership firm is a totality of every partner and that the default of one of the partners can be taken into consideration for treating the firm as a defaulter even if only one of its partners continues to be in arrears of abkari dues.

Section 5 of the Indian Partnership Act, 1932 (the Act) provides unequivocally that the relation of partnership arises from contract and not from status. Such contracts clearly cannot override provisions in a statute or statutory rules. Section 49 of the Act stipulates for payment of firm debts and also of separate debts of any partner by use of firm's property and if there is no surplus then separate property shall be applied for payment of a partner's separate debts. Other than the defaulting partner can always claim their loss, if any, from the latter.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2508 of 2008

Decided On: 19.08.2015

 Modern Hotel Vs. Commissioner of Excise and Ors.

Hon'ble Judges/Coram:

Vikramajit Sen and Shiva Kirti Singh, JJ.

Citation: (2016) 15 SCC620

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Whether appeal filed in name of partnership firm will abate if legal heirs of deceased partner are not brought on record?

Order 30 rule 4 of the Civil Procedure Code provides that notwithstanding anything contained ins. 45 of the Indian Contract Act, 1872, two or more persons may sue or be sued in the name of a firm under the foregoing provisions and if any of such persons dies, whether before the institution or during the pendency of any suit, it shall not be necessary to join the legal representative of the deceased as a party to the suit. We have already said that the injunction order was directed against the partners in the names of the firms and that it operated as against them. The partners filed the appeal in the names of the firms against the order and when one of the partners died, the failure to implead his legal representatives would not cause the appeal to abate under sec. 107 of the C.P.C. the provisions of rule 4 of Order XXX will apply to appeals also.

Supreme Court of India

Sohan Lal And Others vs Amin Chand And Sons And ... on 22 August, 1973

Equivalent citations: 1973 AIR 2572, 1974 SCR (1) 453

Bench: Mathew, Kuttyil Kurien

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When prosecution for misappropriation against partner of partnership firm can be quashed?

 In this backdrop of the matter, the fact that the
complaint was lodged fourteen (14) years after the
original date of partnership without accounting for the
delay and having failed to specify any recent dates on
which the alleged offence of cheating/misappropriation
were allegedly committed by petitioner no. 1, the
motive behind the FIR becomes very questionable
since it has not even been mentioned in the complaint
that the complainant at any time in writing
demanded production of the Partnership accounts or
Books during the long period of 14 years. His
allegation of having verbally made such demand only
on 20.03.2012 without any explanation of the previous
delay also hits his case badly, specially considering
that he seeks to impute the allegations of criminal
misappropriation/ breach of trust upon his admitted
Partner in respect of the Partnership money, which, as
has been observed earlier, is not legally sustainable.
For the aforesaid reasons, in the opinion of this Court,
continuation of the criminal proceedings against the
petitioners would be a clear abuse of the process of
Court.22.
IN THE HIGH COURT AT CALCUTTA
 (Criminal Revisional Jurisdiction)
 Appellate Side
Present:
The Hon’ble Justice Sudip Ahluwalia
C.R.R. 3393 of 2014
Smt. Malabika Mondal & Anr.
Vs.
The State of West Bengal & Anr.

Judgment On : 20-05-2016

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Whether partners can be prosecuted for dishonour of cheque even though partnership firm is not prosecuted?

However,   in   my   considered   opinion,   the   conclusions
drawn by the Apex Court in the case of Aneeta Hada (supra) are not
based merely on the fact that the company is a separate legal entity
and juristic person, but these conclusions are drawn on the basis of
the fact that section 141 of the NI Act deals with vicarious liability.
In paras 58 and 59 of the said judgment, referred above, the Apex
Court has referred to the wording in section 141 of the NI Act and
observed that commission of offence by a company is an express
condition precedent to attract vicarious liability of others.   It was
further held that the words “as well as the company” appearing in

the   section   make   it   absolutely   unmistakably   clear   that   when   a
company is prosecuted, then only the persons mentioned in the other
categories could be vicariously liable for the offence subject to the
averments in the petition and proof thereof.  It was further observed
that the other categories of offenders like directors or partners of the
firm   can   only   be   brought   in   the   dragnet   on   the   touchstone   of
vicarious liability as the same has been stipulated in the provision
itself.  
 Thus,   the   Apex   Court   has   arrived   at   an   irresistible
conclusion that for maintaining the prosecution under section 141 of
the NI Act,  arraigning of the company as an accused is imperative,
mainly   and   mostly   on   the   basis   of   the   vicarious   liability   of   the
directors of the company and not necessarily because the company is
a   juristic   person   and   it  has   its  own  respectibility.     That  was  an
additional circumstance considered by the Apex Court while holding
that arraigning of a company as an accused is imperative, but the
main basis for arriving at its conclusion was the vicarious liability
which the directors or partners of the firm can have towards the
company and hence without joining the company on the touch­stone
of vicarious liability they cannot be prosecuted.  
 Therefore,  the  ratio  laid  down  in  the  case of  Aneeta
Hada  (supra)   can   be   made   equally   applicable   in   the   case   of
partnership firm also.   The partners are liable and sued in their

vicarious liability.  Whether the partnership firm is a juristic person
or not is a different aspect.  What is important is that a partner of the
firm is arraigned as an accused in the dragnet on the touchstone of
vicarious liability, as is done in the case of directors of the company.
Therefore, there is no reason at all to make any distinction in respect
of   the   law   to   be   made   applicable   to   partnership   firm   and   the
company.  
 Moreover, the Legislature has already made it clear that
the company includes any body corporate which includes firm or
other association of individuals and director in relation to a firm
means a partner in the firm.  On this count also, when section 141 of
the NI Act and explanation thereto does not make any distinction
between the company and the partnership firm, there is absolutely
no reason to make such distinction while making applicable the law
laid   down   by   the   Apex   Court   in  Aneeta   Hada  (supra)   to   the
partnership firm merely because in that judgment the Apex Court
was considering the eventuality of non­joining of the company.  The
basic premise of holding either the director or the partner liable for
prosecution being the same that of the vicarious liability.  Therefore,
once the company is held to be essential party and that arraigning of
a company as an accused is imperative for prosecution under section
141   of   the   NI   Act,   it   necessarily   follows   that   arraigning   of   a
partnership   firm   is   also   imperative   for   prosecution   against   the
partners under section 141 of the NI Act.  The prosecution launched

against only one of the partners of the partnership firm, without
joining the partnership firm, cannot be maintainable and on this very
ground,   the   process   issued   against   the   petitioner   is   liable   to   be
quashed and set aside.
17. In this view of the matter, I am also supported by the
judgment of the Delhi High Court in Vijay Power Generators Ltd.
vs. Sumit Seth, 2014 All M.R. (Cri.) Journal 305, wherein also it
has been held that unless the partnership firm is prosecuted and
convicted, the partner thereof cannot be convicted with the aid of
section 141 of the NI Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO.  2909 OF 2013

Philip J. ..  Petitioner
          V/s
 Ashapura Minechem Ltd.

                CORAM:  DR. SHALINI PHANSALKAR­JOSHI, J.
       
DATE OF JUDGMENT:  29 JANUARY 2016
Citation: 2016 ALLMR(CRI)1802

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Whether in eviction suit it is necessary to bring legal heirs of deceased partner of partnership firm on record?

 I find that there is a distinction in a suit for eviction vis-a-vis any other suit. An eviction suit is aimed at evicting a tenant. In the instant case, the tenant is a partnership firm, which has a legal existence. Partners of the said firm were defendants. Decree passed in the suit would, therefore, operate against the firm and through the partners.

12. Order XXX Rule 4(1) deals with an eventuality of there being two or more persons, who are being sued in the name of the firm and if any one of such partners dies before the institution or during the pendency of the suit, it shall not be necessary to join the legal representatives of the deceased as a party to the suit. As such, though the petitioner may claim a right to file an application to be impleaded in the proceedings as a legal representative of the deceased, the same is required to be considered in the facts and circumstances of each case.

Bombay High Court

Ashish Rajendra Malara vs Narayan Sonu Wani And Others on 18 February, 2015

Bench: R.V. Ghuge

Citation; 2015(5) ALLMR 596 Bom

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Whether suit will abate against partnership firm if legal heirs of deceased partner are not brought on record?

This Court (Coram : B.B.Vagyani, J.) has dealt with an identical situation in its judgment dated 20.4.1999, when defendant No.2 in the very same suit had passed away. Issue that was considered was as to whether the suit would abate against the deceased defendant No.2. This Court, upheld the view taken by the trial Court in rejecting the prayer for abatement under application Exhibit 82, thereby concluding that since the  firm is a tenant and merely because one of the partners has died, the suit would not, therefore, abate against the said partners since the decree is to be passed against the firm, which is a tenant.

Bombay High Court

Ashish Rajendra Malara vs Narayan Sonu Wani And Others on 18 February, 2015

Bench: R.V. Ghuge

Citation; 2015(5) ALLMR 596 Bom

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Whether demand notice in case of dishonour of cheque is to be sent to each partner of partnership firm?

 Negotiable Instruments Act, 1881, Sections 138 – Dishonour of Cheque – Offence by firm – Demand notice – Partner of firm issued cheque on behalf of firm – Notice sent to partner who had issued cheque – Held, demand notice not required to be sent to each partner of firm – Notice sent held to be valid. 
 Perusal of the aforesaid provision leaves no doubt that the required notice had been issued to the drawer of the said cheque. It is not the requirement of law that the said notice must be sent to each of the partners. The drawer was the firm and only one of the partners may act on behalf of it. Once the notice was issued to the drawer, it would be compliance with Section 138 of the Negotiable Instruments Act, 1881.

Punjab-Haryana High Court

Anita vs Anil K. Mehra And Ors. on 17 November, 1995

Equivalent citations: 1998 94 CompCas 584 P H, (1996) 112 PLR 321

Bench: V Aggarwal

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When partner of firm will not be liable for dishonour of cheque issued on behalf of firm even though cheque is signed by him?

'Company' means any body corporate and includes a firm or other association of individuals; and (b)  'director', in relation to a firm, means a partner in the firm."

 Section 141 is a penal provision creating vicarious liability and which, as per settled law, must be strictly construed. It would not be sufficient to make a bald and vague statement in a complaint that a partner (arrayed as an accused) in a firm is Incharge of and responsible to the firm for the conduct of the business of such firm. The complainant would be bound to spell out as to how and in what manner respondent No.1 was Incharge of or was responsible to the accused-firm for the conduct of its business. This proposition would be in consonance with the strict interpretation of penal statutes and more so where such statutes create vicarious liability.

 Referring back to the facts of the present case, neither in the complaint filed by the complainant i.e. the present petitioner nor in his testimony as CW3, it was stated that respondent No.1 was responsible for running the affairs of the accused-firm. The lower Appellate Court has specifically taken notice of such fact and has even referred to the cross- examination of the complainant-petitioner Bhagwan Singh wherein he had stated that he was unaware as regards the number of partners in the accused-firm. Learned counsel appearing for the petitioner has not been able to rebut such factual position. In my considered view, the lower Appellate Court has taken the correct view in holding respondent No.1 to be not liable towards discharge of any alleged financial liability of the accused-firm on account of non-compliance of the essentials ofSection 141 of the Negotiable Instruments Act. For the same very reason, even the submission raised by the learned counsel that the cheque in question bore the signatures of respondent No.1 would not be of any consequence inasmuch as it was the case of the complainant himself that such cheque had been issued towards discharge of liability of the accused-firm and not of any personal liability of respondent No.1.

Punjab-Haryana High Court

Bhagwan Singh vs Adarsh Chhibbar And Another on 3 February, 2014

Citation;2015 CRLJ(NOC)475 P&H

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Whether other partners of partnership firm are responsible if cheque issued by one partner is dishonoured?

56. As per Section 18 of the Indian Partnership Act, 1932, the act of the partner of the firm can well be construed as an act on behalf of all the partners if the circumstances warrant such a conclusion. Also that, an every partner in a trading firm has implied authority to borrow money for the purposes of the business or credit of the firm. However, where a negotiable instrument has been drawn by a partner in his own name, the other partners are not liable on the instrument in the absence of evidence that it was made for and on behalf of the firm as per decision Harbhogwandas V. Narayana AIR 1952 Mys 116.

57. Section 22 of the Indian Partnership Act, 1932, enjoins that in order to bind a firm, by an act or an instrument executed by a partner on behalf of the firm, the act should be done or the instrument should be executed in the name of the firm, or in any other manner expressing or implying an intention to bind the firm as per decision of the Hon'ble Supreme Court Devji V. Magan Lal R. Atharana MANU/SC/0020/1964 : AIR 1965 SC 139 and 140.

58. Furthermore, in a case where after the dissolution of the firm the partner taking over the business signed the invoices for the goods sent to an old customer as the proprietor by scoring out the word 'Partner' it was held that the other members of the dissolved firm were not liable for such subsequent transactions as per decision H. Manjunatha Nayak V. Ullal Dayananda Nayak MANU/KA/0183/1984 : AIR 1984 Kant. 55, P.59.

59. At this stage, this Court aptly points out the decision of the Hon'ble Supreme Court Monaben Ketanbhai shah V. State of Gujarat MANU/SC/0596/2004 : (2004) 7 SCC 15, wherein it is held that the primary responsibility is on the complainant to make necessary averments in the complaint so as to make the accused vicariously liable. It is to be remembered for saddling the criminal liability, there is no presumption that every partner known about the transaction.

60. In fact, the obligation of the partners to establish that at the time the offence was committed they were not in charge of and were not responsible to the firm for the conduct of the business of the firm, would come into operative play only when at first the complainant makes necessary averments/allegations in the complaint and establishes that fact.

Equivalent Citation: 2015ALLMR(Cri)JOURNAL260, I(2015)BC308(Mad.), 2014(5)CTC808, 2014(4)MLJ(Crl)225

IN THE HIGH COURT OF MADRAS

Crl. A. No. 679 of 2009

Decided On: 14.08.2014

Appellants: C. Ponnusamy
Vs.
Respondent: Chinnamman Constructions

Hon'ble Judges/Coram:M. Venugopal, J.

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Whether retiring partner will continue to be liable as partner to third parties for any act done by any other partners if notice of retirement is not published official Gazette?

This section provides that a retiring partner will continue to be liable as a partner to third parties for any act done by any other partners which would have been an act of the firm if done before the retirement till public notice is given for the retirement. Section 72 of the Indian Partnership Act prescribes the mode of giving public notice under the Act. Under this Section, notice of the retirement has to bo given to the Registrar of Firms under Section 63 and publication has to be made in the Official Gazette and at least in any vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business. In this case, it may be noticed, that notice of retirement is published in three dailies one in English and two in Telugu, circulating in the district to which the place of business of the 11th defendant-firm belongs. Notice is also given under Section 63 of the Act to the Registrar of Firms; but admittedly, the publication was not made in the Official Gazette. Therefore it is dear that the requirement of Section 32, Clause (3) read with Section 72, Clause (a) of the Act is not satisfied in this case. The learned counsel for the appellants argues that Section 72 indicates only one mode of giving public notice and does not exclude any other mode of giving public notice under Section 32, Clause (3). We find it difficult to accept this contention.

Andhra High Court

Thummala Rama Rao And Ors. vs Chodagam Venkateswara Rao And ... on 14 July, 1961

Equivalent citations: AIR 1963 AP 154

Bench: Seshachelapathi, C Sastry

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