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The Madras High Court on 23rd July quashed the proceedings ongoing before the Judicial Magistrate for the dishonour of a cheque on grounds that the complaint under Section 138 of the Negotiable Instruments Act was filed against the partner without making the partnership firm a party.

Justice N. Anand Venkatesh listed two issues in Rangabashyam & V. Rajeshwari v Ramesh, to be discussed by court:

  1. Whether an unregistered Partnership Firm can also be brought within the purview of Section 141 of the Negotiable Instruments Act?
  2. And in such cases whether the Partnership Firm must be made as an accused along with the other partners, in order to maintain a complaint for an offence under Section 138 of the Negotiable Instruments Act?

A cheque worth Rs.3,00,000/- drawn in favour of Ramesh – towards the discharge of certain amounts due after forced retirement – bounced due to insufficiency of funds. Ramesh filed a complaint naming Rangabashyam and one other, but he failed to include the name of ‘Laxmi Agencies’, the partnership firm, on behalf of which the cheque was drawn. The petition before the High Court challenged the proceedings on this ground.

It was argued on behalf of Ramesh, that the partnership firm was not a registered entity and hence could not be made a party. Court however relied on its 2014 judgement in N.Elangovan v C.Ganesan where the company law rule of making the Company a party for moving against the directors has been made applicable to partnership firms as well.

Court held that the bar to make an unregistered firm party to the proceedings was inapplicable since the word “suit” envisaged under Section 69(2) of the Partnership Act, could not be stretched to criminal prosecutions.

High Court has relied on the 2012 Supreme Court ruling in Aneeta Hada v. Godfather Travels and Tours Private Limited wherein it was held that a partnership firm can also be brought within the purview of Section 141 of the Partnership Act, and in such cases the firm must be made as an accused along with the other partners in order to maintain a complaint for an offence under Section 138 of the Act.

Exercising its powers under Section 482 of CrPC, the High Court quashed the criminal proceedings.

–India Legal Bureau

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