1. Factual Background and Procedural History
The appellant–complainant advanced a sum of ₹21 lakh to the respondents, who were partners of a partnership firm named Mouriya Coirs. To discharge this liability, one of the partners issued a cheque on behalf of the firm. The cheque was dishonoured due to the firm’s bank account being frozen.
A statutory notice under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) was issued only to the partners, not to the firm. The complainant thereafter filed a complaint (STC No. 1106/2022) before the Judicial Magistrate No. II, Pollachi, against both partners but did not implead the partnership firm as a separate accused.
At the behest of the accused-partners, the Madras High Court quashed the complaint (Crl. O.P. No. 1533/2024) on 26.02.2024 on the ground of non-impleadment of the firm and non-service of statutory notice upon it.
The complainant preferred a criminal appeal before the Supreme Court. The present judgment, delivered on 14 July 2025, decides the question of maintainability of such complaints in the context of partnership law.
2. Identification of Legal Issues
The Supreme Court framed two core legal issues:
- Whether a complaint under Section 138 NI Act is maintainable when only the partners are arrayed as accused without impleading the partnership firm as an accused?
- Whether failure to issue a statutory notice to the partnership firm renders the complaint defective and liable to be quashed?
3. Arguments of the Parties
Appellant (Complainant)
- Contended that a partnership firm is not a separate juristic entity, unlike a company.
- Partners are jointly and severally liable for firm obligations under Section 25 of the Partnership Act, 1932.
- Service of notice on the partners is equivalent to service upon the firm.
- The liability of partners is personal, not merely vicarious.
Respondents (Accused-Partners)
- Relied on Section 141 NI Act to argue that a “company” includes a “firm”.
- Asserted that where an offence is committed by a firm, the firm must first be arraigned as a principal accused before partners can be prosecuted.
- Relied on Aneeta Hada v. Godfather Travels & Tours (2012) 5 SCC 661 to argue that vicarious liability arises only when the juristic entity is itself prosecuted.
4. Court’s Analysis and Reasoning
The Supreme Court undertook a detailed comparison of companies and partnership firms, emphasizing the following jurisprudential distinctions:
Aspect | Company | Partnership Firm |
Juristic Status | Separate legal entity | No independent juristic identity |
Liability | Vicarious (directors) | Joint & several (partners personally) |
Succession | Perpetual | Dependent on members |
Ownership of property | Company owns | Partners are co-owners |
Key Findings
- No Vicarious Liability in Partnership Firms
- Unlike companies, where directors are made vicariously liable, the liability of partners is primary, joint and several, arising by operation of law under Sections 25 and 26 of the Partnership Act.
- Unlike companies, where directors are made vicariously liable, the liability of partners is primary, joint and several, arising by operation of law under Sections 25 and 26 of the Partnership Act.
- Firm is Only a Compendious Expression
- The firm has no independent existence apart from its partners.
- Therefore, proceeding against partners is equivalent to proceeding against the firm.
- The firm has no independent existence apart from its partners.
- Notice to Partners Deemed Notice to Firm
- The requirement of statutory notice under Section 138 NI Act was held to be satisfied.
- The requirement of statutory notice under Section 138 NI Act was held to be satisfied.
- Distinguishing Aneeta Hada
- Aneeta Hada applies to companies, not to ordinary partnerships, because a company is a separate juristic person.
- Aneeta Hada applies to companies, not to ordinary partnerships, because a company is a separate juristic person.
- Permission to Implead Firm
- Although not mandatory for maintainability, the Court permitted impleadment of the firm as an added measure.
- Although not mandatory for maintainability, the Court permitted impleadment of the firm as an added measure.
5. Final Conclusion and Holding
The Supreme Court held:
- A complaint under Section 138 NI Act is maintainable even if the partnership firm is not arraigned as an accused, as long as partners are impleaded, since the firm has no existence independent of its partners.
- Notice to partners constitutes valid notice to the firm.
- The High Court’s order quashing the complaint was set aside and the complaint restored.
- Complainant permitted to implead the firm as an accused, though not mandatory.
FAQs:
1. Is it mandatory to make a partnership firm an accused in cheque bounce cases?
No. When partners are arrayed as accused, the complaint is maintainable because the firm has no separate legal identity—partners are personally liable.
2. Is notice under Section 138 NI Act valid if sent only to the partners?
Yes. Notice to partners is deemed sufficient notice to the firm as per the principle of joint and several liability.
3. How is liability of partners different from that of company directors?
Partners have primary and personal liability, whereas directors’ liability is vicarious and arises only when the company is first prosecuted.
4. Can the firm be impleaded later if omitted initially?
Yes. Courts may permit impleadment subsequently, especially when the omission is technical and does not defeat substantive justice.
5. Why was Aneeta Hada not applicable to partnership firms?
Because Aneeta Hada concerns companies, which are separate juristic entities. Partnership firms are not separate legal persons distinct from partners.
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