Madhya Pradesh High Court
Mrs. Rachna Singh vs Manish on 2 April, 2026
Author: Sanjeev S Kalgaonkar
Bench: Sanjeev S Kalgaonkar
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IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SANJEEV S KALGAONKAR
ON THE 2 nd OF APRIL, 2026
MISC. CRIMINAL CASE No. 21668 of 2019
MRS. RACHNA SINGH
Versus
MANISH AND OTHERS
Appearance:
Shri Gagan Bajad - Advocate for the petitioner.
Shri Ravindra Singh Chhabra - Senior Advocate along with Shri
Raghav Raj Singh - Advocate for the respondent [R-1].
ORDER
This petition under section 482 of Code of Criminal Procedure, 1973
(hereinafter referred to “Cr.P.C.”) are filed feeling aggrieved by the impugned
order dated 28.03.2019 in Criminal Private Complaint no. SCNIA/9644319/2016,
whereby application filed by the petitioner for removal of her name as accused,
was dismissed by learned Judicial Magistrate First Class, Indore.
2. The exposition of facts, giving rise to this petition, in brief, is as under :
1. As per the copy of complaint annexed with the petition, the complainant
filed a complaint for the offence punishable under section 138 of the
Negotiable Instruments Act, 1881 (hereinafter referred to “N.I. Act“) and
section 420 of Indian Penal Code, 1860 ( hereinafter referred to “IPC“)
against Pawan Singh and Rachna Singh inter-alia alleging that the
complainant and the accused were partners in M/s. Vani Education in
furtherance of the partnership deed executed on 13.01.2015 retirementSignature Not Verified
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deed dated 15.11.2015 was executed between partners settling the liability
toward the complainant for the amount of Rs. 33,20,000/-. Both the
accused continued partnership firm – M/s Vani Education at the time of
retirement of the complainant from the firm, therefore, both the accused
were liable to payment of liability amount of Rs. 33,20,000/- to the
complainant. Accused Pawan Singh signed and issued six cheques for
payment of the liability amount of Rs. 33,20,000/- in favour of the
complainant on behalf of the firm – M/s Vani Education. The cheque no.
000400 dated 20.07.2016 for Rs. 5,55,335/- was presented by the
complainant at his bank – Kotak Mahindra Bank, Branch – Janjirwala
Chouraha, Indore. The cheque was dishonored and returned with the
remark “payment stopped by drawer” . The accused, despite issuance of
notice through registered post AD on 22.09.2016 demanding payment,
refused to pay the amount of cheque, therefore, the complaint for the
offence punishable under section 138 of N.I. Act and section 420 of IPC
was filed after lapse of period of statutory notice.
3. Learned JMFC, Indore took cognizance of the offence punishable under section
138 of N.I. Act. The petitioner / accused no. 2 Rachna Singh submitted an
application for discharge. Learned JMFC, vide impugned order dated 28.03.2019,
rejected the application on the grounds that once cognizance has been taken and
the trial has proceeded according to the procedure for summons trial, the accused
cannot be discharged. Further, the objection that accused Rachna Singh had
retired as a partner of the firm – M/s Vani Education, will be decided after
evidence.
4. Feeling aggrieved by the impugned order, present petition is filed for quashing
the proceedings against the accused / petitioner Rachna Singh on following
grounds –
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1. Accused Pawan Singh (Respondent No. 2) had issued the cheque in
question to the complainant Manish Tiwari (non-applicant no. 1)
toward full and final settlement as per the admission-cum-retirement
deed. The petitioner also left the partnership firm on 22nd February,
2016. Respondent no. 2 Pawan Singh agreed to pay the petitioner a
sum of Rs. 14,19,000/- as full and final settlement according to
admission-cum-retirement deed dated 22nd February, 2016.
Respondent no. 2 Pawan Singh issued cheques in favour of the
petitioner, which were dishonored, therefore, the petitioner filed
private complaint for the offence punishable under section 138 of
N.I. Act in the Court of JMFC, Indore against M/s Vani Education
and the partners. The petitioner was also cheated by Respondent no.
2 – Pawan Singh.
2. The petitioner has not signed and issued the impugned cheque. She
was not responsible for management of the firm on the date when the
impugned cheque was issued, therefore, the order passed by learned
JMFC, Indore is arbitrary and illegal.
On these grounds, it is requested that the impugned order be set aside and
the petitioner be acquitted in Criminal Private Complaint no.
SCNIA/9643319/2016.
5. Learned counsel for the petitioner, in addition to the grounds stated in the
petition, contended that the petitioner has left the partnership firm M/s Vani
Education vide deed of admission-cum-retirement dated 22 nd February, 2016,
therefore, the petitioner is not liable for the cheque issued by Respondent no.2 or
by the firm after her retirement. Learned counsel, referring to para-3 of the
complaint, submitted that the impugned cheque was issued by accused no. 2
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Pawan Singh. He has assured the payment of amount of the cheque. There is no
allegation that the petitioner is, in any manner, involved in the transaction
regarding issuance of the cheque. Learned counsel further contends that section
138 of N.I. Act provides for individual liability against the person, who has signed
the negotiable instrument. Section 141 of N.I. Act provides for vicarious and
deemed liability against the partners of the firm, provided specific averments with
regard to their involvement in conduct of the business of the firm are made in the
complaint. Learned counsel for the petitioner referring to the judgments of
Supreme Court in the case of Bijoy Kumar Moni Vs. Paresh Manna & Anr
reported in 2024 INSC 1024, Pawan Kumar Goel Vs. State of U.P. & Another
reported in 2022 (8) SUPREME 618 and Order dated 29.01.2016 passed in Cr.
W.P. No. 2909/2013 by the High Court of Bombay contended that the complaint
is not maintainable also for the reason that the partnership firm M/s Vani
Education was not made a party. In view of the provisions contained in Section
141 of N.I. Act, non-impleadment of the firm is fatal for the complaint.
6. Per contra, learned counsel for the respondent/complainant submitted that the
complainant had retired from the partnership firm – M/s Vani Education vide
retirement deed dated 15.11.2015, wherein the existing partners i.e. accused
Pawan Singh and Rachna Singh have admitted liability of payment of Rs.
33,20,000/- toward full and final settlement in favour of the complainant. The
impugned cheque was issued toward settlement of aforesaid liability. The
petitioner was a partner in the firm at the time of retirement of the complainant
from the partnership firm, therefore, the petitioner is liable for the payment of
settlement amount. Subsequent retirement of the petitioner from the firm would
not absolve her from liability. Learned counsel further referring to provisions of
the Partnership Act, contended that the procedure prescribed for notification of
retirement from the partnership firm has not been complied with. The effect of
subsequent retirement of the petitioner from the partnership firm – M/s Vani
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Education would to be decided after evidence in trial. The petitioner, as a partner
in M/s Vani Education, is responsible for the offence punishable under section
138 of N.I. Act in view of existing liability against the firm. Learned counsel for
the respondent/complainant referring to the judgments of Supreme Court in the
case of Riya Bawri Vs. Mark Alexander Davidson & Ors . reported in 2023
Online SC 1072, G. Malarvizhi & Ors. Vs. P. Sampath reported in 2023 SCC
Online Del 3835 and Rallis India Ltd Vs. Poduru Vidhabu reported 2011(13)
SCC 889 and S.P. Mani & Mohan Dairy Vs. Dr. Snehlata Elangovan reported in
2023(10) SCC 685 contended that the execution of retirement deed will have to
be proved by the petitioner by adducing evidence at the trial. The Court, while
considering the quashing of complaint under Sec. 482 of Cr.P.C., cannot indulged
into meticulous examination of facts.
7. Heard, both the parties and perused the record.
8. The Apex Court, in the case of Indian Oil Corpn. V. NEPC India Ltd., reported
in (2006) 6 SCC 736, held as under:
“12. The principles relating to exercise of jurisdiction under Section 482 of the Code
of Criminal Procedure to quash complaints and criminal proceedings have been
stated and reiterated by this Court in several decisions. To mention a few–
Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre [(1988) 1 SCC
692 : 1988 SCC (Cri) 234], State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335
: 1992 SCC (Cri) 426], Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC
194 : 1995 SCC (Cri) 1059], Central Bureau of Investigation v. Duncans Agro
Industries Ltd. [(1996) 5 SCC 591 : 1996 SCC (Cri) 1045], State of Bihar v.
Rajendra Agrawalla [(1996) 8 SCC 164 : 1996 SCC (Cri) 628], Rajesh Bajaj v.
State NCT of Delhi [(1999) 3 SCC 259 : 1999 SCC (Cri) 401], Medchl Chemicals &
Pharma (P) Ltd. V. Biological E. Ltd. [(2000) 3 SCC 269 : 2000 SCC (Cri) 615],
Hridaya Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168 : 2000 SCC
(Cri) 786], M. Krishnan v. Vijay Singh [(2001) 8 SCC 645 : 2002 SCC (Cri) 19] and
Zandu Pharmaceutical Works Ltd. V. Mohd. Sharaful Haque [(2005) 1 SCC 122 :
2005 SCC (Cri) 283].
The principles, relevant to our purpose are:
v. A complaint can be quashed where the allegations made in the complaint, even if
they are taken at their face value and accepted in their entirety, do not prima facie
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purpose, the complaint has to be examined as a whole, but without examining the
merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the
material nor an assessment of the reliability or genuineness of the allegations in the
complaint, is warranted while examining prayer for quashing of a complaint.
(ii) A complaint may also be quashed where it is a clear abuse of the process
of the court, as when the criminal proceeding is found to have been initiated
with mala fides/malice for wreaking vengeance or to cause harm, or where
the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to stifle or scuttle a
legitimate prosecution. The power should be used sparingly and with
abundant caution.
( i v ) The complaint is not required to verbatim reproduce the legal
ingredients of the offence alleged. If the necessary factual foundation is laid
in the complaint, merely on the ground that a few ingredients have not been
stated in detail, the proceedings should not be quashed. Quashing of the
complaint is warranted only where the complaint is so bereft of even the
basic facts which are absolutely necessary for making out the offence.
(v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely
a criminal offence; or (c) a civil wrong as also a criminal offence. A
commercial transaction or a contractual dispute, apart from furnishing a
cause of action for seeking remedy in civil law, may also involve a criminal
offence. As the nature and scope of a civil proceeding are different from a
criminal proceeding, the mere fact that the complaint relates to a commercial
transaction or breach of contract, for which a civil remedy is available or has
been availed, is not by itself a ground to quash the criminal proceedings. The
test is whether the allegations in the complaint disclose a criminal offence or
not. (emphasis added)
9. The petitioner asserts that she retired from the partnership firm prior to the
issuance of the cheque in question. The petitioner has relied on a copy of date of
admission cum retirement deed dated 22.02.2016. The copy of retirement deed
cannot be treated as unimpeachable, uncontroverted and clinching evidence,
sufficient to hold at this juncture that petitioner Rachna Singh had retired before
issuance of cheque in question and she was not liable to the partnership firm. The
determination would depend on the evidence regarding whether any retirement
deed was properly executed and whether the retiring partner (petitioner) complied
with the provisions of Section 32(2) and 72 of the Indian Partnership Act.
Therefore, the plea of retirement before issuance of cheque in question by itself is
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not sufficient to quash the summoning order and the complaint. [Riya Bawri Vs.
Mark Alexander Davidson & Ors and Rallis India Ltd Vs. Poduru Vidhabu (supra)
relied].
However, it is imperative to consider another significant legal aspect
contended by the petitioner.
10. Section 138 of the Negotiable Instruments Act,1881 reads as under:
138. Dishonour of cheque for insufficiency, etc., of funds in the account.
Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any amount of money to another person from out of that
account for the discharge, in whole or in part, of any debt or other liability, is
returned by the bank unpaid, either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque or that it exceeds the
amount arranged to be paid from that account by an agreement made with that bank,
such person shall be deemed to have committed an offence and shall, without
prejudice to any other provision of this Act, be punished with imprisonment for a
term which may be extended to two years’, or with fine which may extend to twice
the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless–
(a) the cheque has been presented to the bank within a period of six months from the
date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a
demand for the payment of the said amount of money by giving a notice; in writing,
to the drawer of the cheque, within thirty days of the receipt of information by him
from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of
money to the payee or, as the case may be, to the holder in due course of the cheque,
within fifteen days of the receipt of the said notice.
Explanation.–For the purposes of this section, “debt of other liability” means a
legally enforceable debt or other liability.”
11. The Supreme Court in case of Kusum Ingots & Alloys Ltd. v. Pennar
Peterson Securities Ltd. reported in (2000) 2 SCC 745 explained the ingredients
for making out offence punishable under Section 138 of the NI Act as under :
“On a reading of the provisions of Section 138 of the NI Act it is clear that the
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ingredients which are to be satisfied for making out a case under the provision are:
(i) a person must have drawn a cheque on an account maintained by him in a bank
for payment of a certain amount of money to another person from out of that
account for the discharge of any debt or other liability;
(ii) that cheque has been presented to the bank within a period of six months from
the date on which it is drawn or within the period of its validity, whichever is
earlier;
(iii) that cheque is returned by the bank unpaid, either because the amount of money
standing to the credit of the account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account by an agreement made
with the bank;
(iv) the payee or the holder in due course of the cheque makes a demand for the
payment of the said amount of money by giving a notice in writing, to the drawer of
the cheque, within 15 days of the receipt of information by him from the bank
regarding the return of the cheque as unpaid;
(v) the drawer of such cheque fails to make payment of the said amount of money to
the payee or the holder in due course of the cheque within 15 days of the receipt of
the said notice.” (emphasis added)
12. In case of Bijoy Kumar Moni Vs. Paresh Manna & Anr reported in 2024
INSC 1024, it was held that-
38. The proviso (b) to Section 138 provides that the payee or the holder of the
cheque which has been dishonoured must give a written notice to the drawer of the
cheque within 30 days of the receipt of information from the bank that the cheque
has been returned as unpaid. Further proviso (c) provides that if the drawer of the
cheque makes the payment of the amount mentioned in the cheque within 15 days of
receiving the notice mentioned in proviso (b), then he cannot be held liable under
Section 138.
39. What invariably follows from a perusal of the aforesaid provisions is that it is
only the drawer of the cheque who can be held liable under Section 138. Section
141 is an exception to this scheme of the NI Act and provides for vicarious liability
of persons other than the drawer of the cheque in cases where the drawer of the
cheque under Section 138 is a corporate person.
44. In yet one another decision of this Court in the case of N. Harihara
Krishnan v. J. Thomas reported in (2018) 13 SCC 663, while dealing with the issue
of commission of an offence under Section 138 of the NI Act by a company, the
Court observed that Section 138 only contemplates the drawer of the cheque to be
responsible for the commission of the offence. It is only by virtue of Section 141
that certain persons other than the drawer of the cheque can be made liable for the
offence in cases where the offence under Section 138 is committed by a company
and not an individual person. The Court, in the facts of the case before it, further
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held that the identity of the drawer of the cheque was apparent from the cheque
itself and thus it was not open to the payee/complainant to seek impleadment of the
company, that is, the drawer of the cheque, at a belated stage by filing an
impleadment application when it had instituted the complaint only against the
authorised signatory who had signed the cheque on behalf of the company. The
Court also held that the offence under Section 138 is person specific and in the
absence of applicability of the principles of the Criminal Procedure Code, 1973, the
magistrate cannot take cognizance of the complaint unless it is made against the
drawer of the cheque, as it is only the drawer who can be an accused under Section
138. The relevant observations are reproduced hereinbelow:
“20. The offence under Section 138 of the Act is capable of being committed
only by the drawer of the cheque. The logic of the High Court that since the
offence is already taken cognizance of, there is no need to take cognizance of
the offence against Dakshin is flawed. Section 141 stipulates the liability for
the offence punishable under Section 138 of the Act when the person
committing such an offence happens to be a company–in other words when
the drawer of the cheque happens to be a company. […]xxx xxx xxx
22. The High Court failed to appreciate that the liability of the appellant (if
any in the context of the facts of the present case) is only statutory because
of his legal status as the Director of Dakshin. Every person signing a cheque
on behalf of a company on whose account a cheque is drawn does not
become the drawer of the cheque. Such a signatory is only a person duly
authorised to sign the cheque on behalf of the company/drawer of the
cheque. If Dakshin/drawer of the cheque is sought to be summoned for being
tried for an offence under Section 138 of the Act beyond the period of
limitation prescribed under the Act, the appellant cannot be told in view of
the law declared by this Court in Aneeta Hada [Aneeta Hada v. Godfather
Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ)
350 : (2012) 3 SCC (Cri) 241] that he can make no grievance of that fact on
the ground that Dakshin did not make any grievance of such summoning. It
is always open to Dakshin to raise the defence that the initiation of
prosecution against it is barred by limitation. Dakshin need not necessarily
challenge the summoning order. It can raise such a defence in the course of
trial. (emphasis added)
13. Section 141 of the Negotiable Instruments Act,1881 provides as under-
Offences by companies. —
(1) If the person committing an offence under section 138 is a company, every
person who, at the time the offence was committed, was in charge of, and was
responsible to the company for the conduct of the business of the company, as well
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proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any person
liable to punishment if he proves that the offence was committed without his
knowledge, or that he had exercised all due diligence to prevent the commission of
such offence:
Provided further that where a person is nominated as a Director of a
company by virtue of his holding any office or employment in the Central
Government or State Government or a financial corporation owned or controlled by
the Central Government or the State Government, as the case may be, he shall not
be liable for prosecution under this Chapter.
(2) Notwithstanding anything contained in sub-section (1), where any offence under
this Act has been committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to, any neglect on the
part of, any director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be guilty of that
offence and shall be liable to be proceeded against and punished accordingly.
Explanation.–For the purposes of this section,–
(a)”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.
14. A three-Judge Bench of the Supreme Court, in case of Aneeta
Hada v. Godfather Travels and Tours Private Limited reported in (2012) 5 SCC
661 explained the effect of expression ‘ as well as the company’, in above
provision, as under-
“53. It is to be borne in mind that Section 141 of the Act is concerned with the
offences by the company. It makes the other persons vicariously liable for
commission of an offence on the part of the company. As has been stated by us
earlier, the vicarious liability gets attracted when the condition precedent laid down
in Section 141 of the Act stands satisfied. There can be no dispute that as the
liability is penal in nature, a strict construction of the provision would be
necessitous and, in a way, the warrant.
xxx xxx xxx
58. Applying the doctrine of strict construction, we are of the considered opinion
that commission of offence by the company is an express condition precedent to
attract the vicarious liability of others. Thus, the words “as well as the company”
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appearing in the section make it absolutely unmistakably clear that when the
company can be 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. One cannot be oblivious of the fact that the company is a juristic
person and it has its own respectability. If a finding is recorded against it, it would
create a concavity in its reputation. There can be situations when the corporate
reputation is affected when a Director is indicted.
59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for
maintaining the prosecution under Section 141 of the Act, arraigning of a company
as an accused is imperative. The other categories of offenders can only be brought in
the drag-net on the touchstone of vicarious liability as the same has been stipulated
in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh
[(1970) 3 SCC 491 : 1971 SCC (Cri) 97] which is a three-Judge Bench decision.
Thus, the view expressed in Sheoratan Agarwal [(1984) 4 SCC 352 : 1984 SCC
(Cri) 620] does not correctly lay down the law and, accordingly, is hereby
overruled. The decision in Anil Hada [(2000) 1 SCC 1 : 2001 SCC (Cri) 174] is
overruled with the qualifier as stated in para 51. The decision in Modi Distillery
[(1987) 3 SCC 684 : 1987 SCC (Cri) 632] has to be treated to be restricted to its own
facts as has been explained by us hereinabove. ” (emphasis supplied)
15. Learned counsel for the petitioner relied upon the order of the Nagpur Bench
of Bombay High Court in the case of Shri Satyaseelan Kuttappan Vs. P.P.
Sudhakaran and Another Order dated 28.04.2023 passed in Criminal Revision
Application No.94/2023 to contend that there is no restriction on making of
unregistered partnership firm an accused u/S 141 of NI Act. Section 141 of N I
Act mandates inclusion of the firm as an accused regardless of registration status.
16. Also in the case of Philip J Vs. Ashapura Minechem Ltd . Reported in 2016
CRI.L.J.(NOC) 195 decided on 29.01.2016 , it was held that for maintaining
prosecution against a partner under Section 141 of N.I. Act, arraigning of
partnership firm as an accused is imperative. However, in the case of Dhanasingh
Prabhu Vs. Chandrasekhar & Another reported in (2025) 10 SCC 96 , the
following observations have been made:
15. On hearing the learned counsel for the appellant and the learned Senior Counsel
for the respondent, the points that arise for our consideration revolve around the
interpretation of the expressions, “company” and “Director” in the Explanation to
Section 141 of the Act in the context of the partners of a partnership firm. In other
words, the questions are:
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“(i) Whether the High Court was right in dismissing the complaint on the
ground that the name of the partnership firm was not mentioned in the
statutory notice issued by the appellant-complainant to the respondents under
Section 138 of the Act and was also not arraigned as an accused in the
complaint filed by the appellant-complainant?
(ii) What order?”
22. We are of the view that having regard to the distinct facts in the aforesaid case
in Dilip Hariramani v. Bank of Baroda, (2024) 15 SCC 443, relief was granted by
this Court but the present case cannot be decided on the basis of the aforesaid
judgment. The three significant facts noted in the aforesaid judgment must be
contrasted with the facts which arise in the present case, which are as under:
(i) Notice of the complainant was not issued only to one partner or only to
the authorised signatory of the partnership firm. It was issued to both
partners in the present case.
(ii) The cheque was issued in the name of partnership firm “Mouriya Coirs”.
However, both the partners were issued notice by the complainant which
was not so in the aforesaid case, although the partnership firm was not issued
any statutory notice.
(iii) The complaint has been made against both the partners even though the
firm has not been made an accused in the complaint in the instant case.
23. In fact, in an earlier judgment G. Ramesh v. Kanike Harish Kumar Ujwal,
(2020) 17 SCC 239 which is also a judgment of a two-Judge Bench of this Court, it
was noted from the complaint considered in the said case that the same contained a
sufficient description of:
(i) nature of the partnership;
(ii) the business which was being carried out; and
(iii) role of each of the accused in the conduct of the business and
specifically in relation to the transaction which took place with the
complainant.
In the averments, the accused had been referred to in the plural sense. This Court
observed that Section 141 uses the expression “company” so as to include a firm or
association of a persons. That the first accused in the said case was a partnership
firm of which the remaining two accused were the partners which fact had been
missed by the High Court and therefore the appeal was allowed.
24. Paras 11 and 12 of the judgment in G. Ramesh case read as under:
“11. In terms of the Explanation to Section 141, the expression “company”
has been defined to mean any body corporate and to include a firm or other
association of individuals. Sub-section (1) of Section 141 postulates that
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where an offence is committed under Section 138 by a company, the
company as well as every person who, at the time when the offence was
committed, was in charge of and was responsible to the company for the
conduct of the business shall be deemed to be guilty of the offence.
12. In determining as to whether the requirements of the above provision
have been fulfilled, it is necessary to bear in mind the principle of law that a
partnership is a compendious expression to denote the partners who
comprise the firm. By the deeming fiction in Explanation (a) the expression
“company” is defined to include a firm.”
25. While holding that Section 141 is a deeming provision, it was also observed that
a partnership is a compendious expression to denote the partners who comprise the
firm which means that a firm without a reference to its partners has no juristic
identity in law. By a deeming fiction, in Explanation (a) to Section 141, the
expression “company” has been defined to include a firm. Since the High Court had
lost sight of the fact that a partnership firm has to be read within the meaning of
Section 141 which uses the expression “company”, the appeal filed by the
complainant therein was allowed.
26. On considering the aforesaid judgments, we observe that even if we have to
come to the conclusion that the juristic entity i.e. the partnership firm is the primary
accused in the instant case it would be necessary for us to also state that such a
juristic entity, namely, a partnership firm is not distinct from the partners who
comprise the partnership. In other words, if the complainant had proceeded only
against the partnership firm and not the partners it possibly could have been held
that the partnership firm in the absence of its partners is not a complete juristic
entity which can be recognised in law and therefore cannot be proceeded against. On
the other hand, in the instant case the complainant has proceeded against the two
partners. The complainant is aware of the fact that the cheque has been issued in the
name of the partnership firm “Mouriya Coirs” and has been signed by one of the
partners. The complainant has proceeded against the partners only without
arraigning the partnership firm as an accused. It is necessary to reiterate that a
partnership firm in the absence of its partners cannot at all be considered to be a
juristic entity in law. On the other hand, the partners who form a partnership firm
are personally liable in law along with the partnership firm. It is a case of joint and
several liability and not vicarious liability as such. Therefore, if the complainant
herein has proceeded only against the partners and not against the partnership firm,
we think it is not something which would go to the root of the matter so as to
dismiss the complaint on that ground. Rather, opportunity could have been given to
the complainant to implead the partnership firm also as an accused in the complaint
even though no notice was sent specifically in the name of the partnership.
27. Alternatively, notice to the partners/accused could have been construed as notice
to the partnership firm also. We say so for the reason that unlike a company which
is a separate juristic entity from its Directors thereof, a partnership firm comprises of
its partners who are the persons directly liable on behalf of the partnership firm and
by themselves. Therefore, a partnership firm, in the absence of the partners being
arraigned as accused would not serve the purpose of the case and would be contrary
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to law. On the other hand, even in the absence of making a partnership firm an
accused in the complaint, the partners being made the accused would be sufficient
to make them liable inasmuch as the partnership firm without the partners is of no
consequence and is not recognised in law. This is because in the case of a
partnership firm, the said juristic entity is always understood as a compendious term,
namely, the partnership firm along with its partners. Therefore, if the appellant-
complainant had proceeded only against the partnership firm and not its partners
then possibly the respondents would have been right in contending that the
complaint was not maintainable but here the case is reversed. The complainant
herein has not arraigned the firm but has arraigned the partners of the firm as
accused and has also issued notice to them; therefore, we find that the defect, if any,
is not significant or incurable in these circumstances. Permission is therefore to be
granted to the complainant to arraign the partnership firm also as an accused in the
complaint. Moreover, the cheque was issued in the name of the firm and signed by
one of the partners, for and on behalf of the other also, therefore, the liability is
deemed to be on both the partners of the firm.
28. Hence, permission is given to arraign the partnership firm as an accused having
regard to the peculiar characteristics of a partnership firm and a company on which
aspect we will discuss further.
1 7 . The Supreme Court in case of Dhanasingh Prabhu (supra) while
distinguishing a partnership firm from a Company regarding liability for the
offence punishable under Section 138 read with Section 141 of the Negotiable
Instruments Act 1881, held as under-
62. The Explanation to Section 141 has two clauses:
62.1. Clause (a) defines a company to mean any body corporate and includes a firm
or other association of individuals. The expression “company” encompasses, inter
alia, a body corporate which refers to a company incorporated under the provisions
of the Companies Act or a statutory body. The expression “company” is inclusive
inasmuch as it includes a firm, meaning thereby a partnership firm, as per the
provisions of the Partnership Act, as well as a limited liability partnership or other
association of individuals.
62.2. Clause (b) of the Explanation defines a Director as mentioned in sub-section
(2) of Section 141 of the Act in relation to a firm to mean a partner in the firm.
Thus, by a legislative device an inclusive definition is added by way of an
Explanation to Section 141 of the Act inasmuch as in jurisprudence and in law, a
company is a distinct body corporate and separate juristic entity as compared to a
partnership firm.
63. On a conjoint reading of the various clauses of Section 141, what emerges is that
the expression “company” has been used in an expansive way to include not just a
company incorporated under the provisions of the Companies Act stricto sensu but
also any body corporate such as a statutory company as well as other artificial
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juristic entity such as a partnership firm or other association of individuals. Hence,
the expression “Director” in sub-section (2) of Section 141 is not restricted to a
Director of an incorporated company or a statutory body, but also includes a partner
of a firm. The expression “Director” in sub-section (2) of Section 141 of the Act in
relation to a firm means a partner, which is also a legislative device adopted by
Parliament knowing fully well and being conscious of the fact that a partnership
firm, jurisprudentially speaking, does not stand on a par with a Director of a body
corporate. Since Parliament has used the expression “company” encompassing all
types of juristic persons, it was necessary to give an expanded definition to the
expression “Director” in relation to a firm to mean a partner in the firm. Therefore,
the inclusion of a firm within the meaning of the expression “company” is by a legal
fiction and by way of a legislative device only for the purpose of creating a liability
on the partners of the firm, which in any case, they are liable under the law of
partnership in India. But the definition of the word “company” including a
partnership firm has been incorporated in the Explanation for the sake of
convenience, as otherwise a similar provision would have to be inserted for the very
same purposes. Instead of replicating the same definition for different kinds of
juristic entities, Parliament has thought it convenient to add an Explanation to define
a company for the purpose of Section 141 of the Act in the context of an offence
committed by, inter alia, a company, as understood within the meaning of the
Companies Act, and also include a firm or other association of individuals within
the definition of company. Similarly, under clause ( b) of the Explanation, the
expression “Director”, in relation to a firm, means a partner in the firm.
64. This also demonstrates the fact that while a Director is a separate persona in
relation to a company, in the case of a partnership firm, the partner is not really a
distinct legal persona. This is because a partnership firm is not really a legal entity
separate and distinct as a company is from its Directors but can have a legal persona
only when the partnership firm is considered along with its partners. Thus, the
partnership firm has no separate recognition either jurisprudentially or in law apart
from its partners. Therefore, while a Director of a company can be vicariously liable
for an offence committed by a company, insofar as a partnership firm is concerned,
when the offence is committed by such a firm, in substance, the offence is
committed by the partners of the firm and not just the firm per se. Therefore, the
partners of the firm are liable for the dishonour of a cheque, even though the cheque
may have been issued in the name of the firm and the offence is committed by the
firm. Therefore, in law and in jurisprudence, when a partnership firm is proceeded
against, in substance, the partners are liable and the said liability is joint and several
and is not vicarious. This is unlike a company which is liable by itself and since it is
an artificial juristic entity, the persons in charge of the affairs of the company or
who conduct its business only become vicariously liable for the offence committed
by the company.
65. However, jurisprudentially speaking, the partners of a partnership firm
constitute the firm and a firm is a compendious term for the partners of a firm. This
is opposed to the position of a Director in a company which is a body corporate
stricto sensu and such a company is a separate juristic entity vis-Ã -vis the Directors.
On the other hand, a partnership firm has no legal recognition in the absence of its
partners. If a partnership firm is liable for the offence under Section 138 of the Act,
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it would imply that the liability would automatically extend to the partners of the
partnership firm jointly and severally. This underlying distinction between a
partnership firm and a company which is a body corporate has to be borne in mind
while dealing with an offence committed by a company or a partnership firm, as the
case may be, within the meaning of Section 138 read with Section 141 of the Act.
To reiterate, in the case of a partnership firm, there is no concept of vicarious
liability of the partners as such. The liability is joint and several because a
partnership firm is the business of partners and one cannot proceed against only the
firm without the partners being made liable.
66. Therefore, even in the absence of partnership firm being named as an accused, if
the partners of the partnership firm are proceeded against, they being jointly and
severally liable along with the partnership firm as well as inter se the partners of the
firm, the complaint is still maintainable. The accused in such a case would in
substance be the partners of the partnership firm along with the firm itself. Since the
liability is joint and several, even in the absence of a partnership firm being
proceeded against by the complainant by issuance of legal notice as mandated under
Section 138 of the Act or being made an accused specifically in a complaint filed
under Section 200 CrPC (equivalent to Section 223 BNSS), such a complaint is
maintainable.
67. Thus, when it is a case of an offence committed by a company which is a body
corporate stricto sensu, the vicarious liability on the categories of persons
mentioned in sub-section (1) and sub-section (2) of Section 141 of the Act
accordingly would be proceeded against and liable for the offence under Section
138 of the Act. In the case of a partnership firm on the other hand, when the offence
has been proved against a partnership firm, the firm per se would not be liable, but
liability would inevitably extend to the partners of the firm inasmuch as they would
be personally, jointly and severally liable with the firm even when the offence is
committed in the name of the partnership firm.
68. To reiterate, when the partnership firm is only a compendious name for the
partners of the firm, any offence committed under Section 138 read with Section
141 of the Act would make the partners of the firm jointly and severally liable with
the firm. If, on the other hand, Parliament intended that the partners of the firm be
construed as separate entities for the purpose of penalty, then it would have
provided so by expressly stating that the firm, as well as the partners, would be
liable separately for the offence under Section 138 of the Act. Such an intention
does not emanate from Section 141 of the Act as the offence proved against the firm
would amount to the partners of the 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.
69. In view of the aforesaid discussion, we hold that the High Court was not right in
rejecting or dismissing the complaint for the reason that the partnership firm was
not arraigned as an accused in the complaint or that notice had not been issued to it
under Section 138 of the Act. In view of the aforesaid discussion, the notice issued
to the partners of the firm in the instant case shall be construed to be a notice issued
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to the partnership firm also viz. “Mouriya Coirs”. Permission is granted to arraign
the partnership firm as an accused in the complaint. (emphasis added)
18. The factual scenario, as reflected by the record, is examined in the light of
aforestated propositions of law.
19. In the case on hand, the petitioner/accused Rachana Singh is sought to be
prosecuted in capacity of a partner of the partnership firm M/s. Vani Education.
Although, she has not signed the cheque in question, the fact remains that the
cheque was issued from the account of firm- M/s Vani Education . She was a
partner in the firm and executed Retirement Deed dated 15.11.2015 accepting the
liability toward the complainant for the amount of Rs. 33,20,000/-. The petitioner,
being a partner on the date of acceptance of liability toward the retiring partner
(the complainant) would be jointly and severally liable with the firm. Allegedly,
the cheque in question was issued from the account of the partnership firm to
discharge the liability. The factum and effect of subsequent retirement of
petitioner from the partnership firm would be considered after evidence in the
trial.
20. In view of above discussion, this Court is of considered opinion that the
impugned order does not suffer from manifest impropriety or legal infirmity. No
case is made out to interfere in the impugned order or to quash the criminal
complaint in exercise of inherent jurisdiction.
21. The Petition (MCRC No. 21668 of 2019) is, accordingly, dismissed.
(SANJEEV S KALGAONKAR)
JUDGE
sh
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