In a significant ruling under the Negotiable Instruments Act, the Supreme Court has held that a complaint under Section 138 for cheque dishonour is maintainable against individual partners of a firm even if the partnership firm itself has not been arraigned as an accused.

 

The bench comprising Justices Vikram Nath and Sandeep Mehta ruled that Section 141 of the NI Act, which deals with offences committed by companies and firms, does not mandate that the firm be a necessary party for the liability of its partners to be fastened.

 

The case stemmed from a complaint filed by a company against individual partners of a firm for issuance of a cheque that bounced due to “insufficient funds”. The accused had challenged the maintainability of the complaint on the ground that the partnership firm was not made an accused, and hence, the complaint against them individually could not stand.

 

However, rejecting this argument, the apex court emphasized that partners are agents of the firm and can be held vicariously liable if they are responsible for the conduct of business. The Court made it clear that non-impleadment of the firm is not fatal to the prosecution, especially when the allegations specifically attribute liability to the individual partners involved.

 

This judgment settles a long-standing controversy in cheque bounce cases involving partnerships, especially in situations where the complainant targets specific partners involved in the transaction, and not the firm as a separate legal entity.

 

The decision will have wide ramifications in financial disputes where cheques are issued in the name of firms, but the culpability and intent lie with individual partners.

 

 

Key Takeaways:

• Complaint under Section 138 NI Act is valid even if the firm is not named as an accused.

• Individual partners can be prosecuted based on their role and responsibility.

• Supreme Court reaffirms vicarious liability under Section 141.