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        Case ID :

        2020 (8) TMI 899 - HC - Indian Laws

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        Vicarious liability under cheque dishonour law requires notice to the firm and arraignment of the firm before proceeding against a partner alone. Where a cheque is issued on behalf of a partnership firm, prosecution under Section 138 of the Negotiable Instruments Act read with Section 141 requires ...
                      Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.

                          Vicarious liability under cheque dishonour law requires notice to the firm and arraignment of the firm before proceeding against a partner alone.

                          Where a cheque is issued on behalf of a partnership firm, prosecution under Section 138 of the Negotiable Instruments Act read with Section 141 requires compliance with the statutory pre-conditions, including notice to the firm and arraignment of the firm as the principal offender. Vicarious liability cannot be fastened on the partner alone if the firm is neither issued notice nor impleaded as an accused. On the stated facts, the cheque was drawn for the firm, but notice was served only on the partner and the firm was not made a party, so the complaint failed to meet the legal requirements for prosecution and was not maintainable against the partner alone.




                          Issues: Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 was maintainable against the partner alone when the cheque was issued on behalf of a partnership firm, but no statutory notice was issued to the firm and the firm was not impleaded as an accused.

                          Analysis: The liability under Section 138, read with Section 141 where the drawer is a juristic entity, depends on compliance with the statutory pre-conditions and on arraigning the principal offender as an accused. Where the cheque is issued on behalf of a firm, notice must be addressed to the firm and the firm must be made an accused before vicarious liability can be fastened on the partner who signed the cheque. In the present case, the cheque was issued for the partnership firm, but notice was served only on the partner and the firm was neither noticed nor impleaded. The complaint therefore failed to satisfy the legal requirements for prosecution.

                          Conclusion: The complaint was not maintainable against the petitioner alone, and the proceedings were liable to be quashed.


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                          ActsIncome Tax
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