2025 (5) TMI 635 - HC - Indian Laws

Dishonour of cheque - liability of partner of the firm - summoning of Respondent No. 3 a partner managing the day-to-day affairs of the Partnership Firm as an accused under Section 319 Cr.P.C. in a complaint filed under Section 138 of the Negotiable Instruments Act (N.I. Act) where the sole accused partner had died during the pendency of the proceedings - HELD THAT - First and foremost the partners can be made liable for the acts of the Firm only if the Partnership Firm is a Party to the Complaint . The Apex Court in Dilip Hariramani v. Bank of Baroda 2022 (5) TMI 424 - SUPREME COURT has held that Partner cannot be held to be vicariously liable under NI Act 1881 when Partnership Firm was not the primary accused. The Supreme Court in Aneeta Hada vs M/s Godfather Travels Tours Pvt. Ltd. 2012 (5) TMI 83 - SUPREME COURT after referring to judgments in Iridium India Telecom Ltd. v. Motorola Inc and Ors. 2003 (12) TMI 689 - BOMBAY HIGH COURT and Standard Chartered Bank and others v. Directorate of Enforcement and others 2006 (2) TMI 272 - SUPREME COURT has observed that for maintaining the prosecution under Section 141 of the Act arraigning of a Company as an accused is imperative. The same principle is applicable to the present case. Pertinently unfortunate as it may be while the Cheques were issued in the name Firm and the Legal Notice dated 04.01.2013 was sent to the Firm but were but not made a party and only Mr. Amreesh Sharma was named as Respondent in the Complaint under Section 138 and 142 NI Act. Without the Firm being a party the Complaint only against the Partner was not maintainable at the time of its inception - Secondly no specific allegations have been made against Respondent No. 3 Shubham Sharma qua the liability either in the Legal Notice dated 04.01.2013 or in the Complaint filed u/s 138 r/w 142 NI Act. Conclusion - Admittedly the Cheques were not issued by Respondent No. 3-Shubham Sharma and there are no specific allegations against him that show that he was in overall control of the day-to-day business of the Firm on the date of default. Further the accused partner i.e. Amreesh Sharma is already deceased. The Ld. ACMM has rightly dismissed the Application under Section 319 Cr.P.C. and abated the Complaint on the death of the sole Accused. Petition dismissed.

Summary

The core legal questions considered by the Court are:

1. Whether a partner of a partnership firm can be summoned and held liable under Section 138 of the Negotiable Instruments Act (NI Act) when the complaint was originally filed only against another partner who has since died.

2. Whether the complaint filed solely against the deceased partner can be revived or continued by impleading other partners or the firm itself under Section 319 of the Criminal Procedure Code (Cr.P.C.).

3. The applicability of the Indian Partnership Act, particularly Section 25, regarding joint and several liability of partners for acts of the firm, in the context of NI Act proceedings.

4. The necessity of specific allegations against partners or the firm in complaints under Section 138 NI Act to establish vicarious or joint liability.

5. The legal effect of abatement of a complaint due to the death of the sole accused and whether such abatement can be circumvented by adding other accused subsequently.

Issue-wise Detailed Analysis:

Issue 1: Can a partner be held liable under Section 138 NI Act if the complaint was filed only against another partner who has died?

The relevant legal framework includes Section 138 and Section 141 of the NI Act, which provide for prosecution of persons responsible for dishonour of cheques, and Section 25 of the Indian Partnership Act, which imposes joint and several liability on partners for acts of the firm. The Court also considered precedents including the Supreme Court's rulings in Dilip Hariramani v. Bank of Baroda and Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd.

The Court noted that although the cheques were issued on behalf of the partnership firm and signed by the deceased partner, the complaint was filed solely against that partner and not against the firm or any other partner. The Supreme Court in Dilip Hariramani held that a partner cannot be held vicariously liable under the NI Act unless the firm itself is made a party to the complaint. Similarly, Aneeta Hada emphasized the necessity of arraigning the company (or firm) as an accused for maintaining prosecution under Section 141.

The Court reasoned that since the complaint did not include the partnership firm or other partners as accused at inception, the liability of other partners could not be fastened merely by virtue of Section 25 of the Indian Partnership Act. The complaint was thus "still born" in respect of other partners.

Issue 2: Whether the complaint can be revived or continued by impleading other partners or the firm under Section 319 Cr.P.C. after the death of the sole accused?

Section 319 Cr.P.C. allows a Court to summon any person as an accused if sufficient grounds arise during trial. The petitioner sought to implead the surviving partner and the firm after the death of the sole accused partner.

The Court observed that the complaint had abated due to the death of the sole accused, and that the date of death was not clearly established to determine if the deceased partner died before or after the complaint was filed. The Court held that a complaint that is abated cannot be revived by adding new accused under Section 319 Cr.P.C. The Court relied on the principle that procedural safeguards and specific allegations are necessary to maintain a complaint under Section 138 NI Act, and that the absence of the firm or other partners as parties at the outset precluded such revival.

Further, the Court noted that no specific allegations were made against the surviving partner regarding control or responsibility for the dishonoured cheques, which is a prerequisite for vicarious liability under the NI Act as per the Supreme Court's rulings.

Issue 3: Applicability of Section 25 of the Indian Partnership Act in the context of NI Act proceedings.

Section 25 of the Indian Partnership Act states that every partner is liable jointly and severally for all acts of the firm done while he is a partner. The petitioner argued that this provision should render the surviving partner liable for the dishonoured cheques issued by the deceased partner on behalf of the firm.

The Court acknowledged the provision but clarified that such liability under the Partnership Act does not automatically translate into criminal liability under the NI Act unless the firm itself is made a party to the complaint. The Court emphasized that the NI Act requires specific procedural compliance and that the complaint must be maintainable against the firm or the individual partners specifically named and accused. Thus, Section 25 alone cannot override the procedural requirements of the NI Act.

Issue 4: Necessity of specific allegations against partners or the firm in complaints under Section 138 NI Act.

The Court referred to the Apex Court's decisions in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and N.K. Wahi v. Shekhar Singh, which held that mere designation as a director or partner is insufficient; there must be specific allegations demonstrating the accused's role in the transaction and control over the business.

Applying this principle, the Court found that the surviving partner was not specifically alleged to have control over the day-to-day affairs at the time of dishonour nor was he named in the complaint. The cheques were signed only by the deceased partner, and the legal notice was not served on the surviving partner. Therefore, the Court held that the complaint could not be sustained against the surviving partner.

Issue 5: Legal effect of abatement of complaint due to death of sole accused and whether such abatement can be circumvented.

The Court reaffirmed the settled legal position that a complaint under Section 138 NI Act abates upon the death of the sole accused. It rejected the petitioner's attempt to circumvent this abatement by impleading other partners or the firm after the complaint had abated.

The Court emphasized that procedural propriety and adherence to statutory requirements are essential to maintain the sanctity of the criminal process. The absence of the firm or other partners as parties at the complaint's inception precluded any subsequent addition under Section 319 Cr.P.C.

Significant Holdings:

"Partner cannot be held to be vicariously liable under NI Act, 1881 when Partnership Firm was not the primary accused."

"For maintaining the prosecution under Section 141 of the Act, arraigning of a Company as an accused is imperative."

"A still born Complaint, which also got abated on demise of Mr. Amreesh Sharma, could not have been infused with life after it got abated by impleading the Firm and Respondent No. 3, Shubham Sharma, as Respondents under Section 319 Cr.P.C."

"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."

"Mere designation as a Director or Partner is not sufficient; specific role and responsibility must be established in the Complaint under Section 138 NI Act."

The Court concluded that the complaint filed solely against the deceased partner was not maintainable against the surviving partner or the firm in the absence of their being made parties initially and specific allegations against them. The complaint abated on the death of the sole accused and could not be revived by impleading others under Section 319 Cr.P.C. The application to summon the surviving partner was rightly dismissed and the complaint was correctly held to have abated. The petition was dismissed accordingly.