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of <h1>Unregistered partnership can file a Section 138 complaint; penal liability not affected.</h1> <h3>Smt. Rani Kapoor Versus M/s. Silvermount</h3> The court held that an unregistered partnership firm can maintain a complaint under Section 138 of the Negotiable Instruments Act. The Supreme Court ... Offence punishable under Section 138 of the Negotiable Instruments Act - whether an unregistered partnership firm is entitled to maintain a complaint under Section 138 NI Act?- Held that:- It is apparent that on finding of the guilt arrived at by the criminal Court the accused is liable to a sentence of imprisonment which may extend to two years, or fine or with fine which may extend to twice the amount of cheque, or with both. Thus discretion is granted to the criminal Court to either award imprisonment or fine or both. Thus proceedings under Section 138 of the NI Act are not recovery proceedings and in a given case the criminal Court may only award sentence of imprisonment. Irrespective of a complaint proceeding under Section 138 of the NI Act, a creditor has the right to institute civil suit for recovery of his debt in which case the same would be recoverable only if it is a legally enforceable debt or other liability. Following the decision of the Supreme Court in BSI Ltd. (2000 (2) TMI 719 - SUPREME COURT OF INDIA ) this Court is of the considered view that the decisions of the Kerala High Court, Karnataka High Court and Punjab & Haryana High Court as noted above lay down the correct law. Thus the issue raised by learned counsel for the petitioner that since the complainant respondent is not a registered firm it cannot maintain a complaint under Section 138 of the NI Act is rejected. Issues Involved:1. Whether an unregistered partnership firm can maintain a complaint under Section 138 of the Negotiable Instruments Act, 1981.2. The applicability of Section 69(2) of the Indian Partnership Act to criminal proceedings under Section 138 of the NI Act.Issue-wise Detailed Analysis:1. Whether an unregistered partnership firm can maintain a complaint under Section 138 of the Negotiable Instruments Act, 1981:The petitioner sought the quashing of a complaint under Section 138 of the NI Act on the grounds that the complainant was an unregistered partnership firm, and thus, under Section 69 of the Indian Partnership Act, could not enforce its rights through a contract. The complaint arose from a dishonoured cheque issued by the petitioner, which was allegedly given as part of a settlement agreement.2. The applicability of Section 69(2) of the Indian Partnership Act to criminal proceedings under Section 138 of the NI Act:The petitioner argued that Section 69(2) of the Indian Partnership Act, which bars unregistered firms from enforcing rights arising from contracts, should apply to complaints under Section 138 of the NI Act. The petitioner relied on differing views from various High Courts on this issue.Analysis of Judicial Precedents:- Kerala High Court (AIR 1975 Ker 144): It was held that the right of action available to an indorsee of a cheque arises by statutory provisions and not from a contract. Thus, Section 69(2) of the Partnership Act does not bar an unregistered firm from maintaining a complaint under Section 138 of the NI Act.- Karnataka High Court (ILR 2003 KAR 4325): It was ruled that Section 69(2) bars unregistered firms from filing civil suits but does not bar them from filing criminal complaints under Section 138 of the NI Act, as the latter involves criminal liability and not the enforcement of a contract.- Punjab & Haryana High Court (2005) 4 RCR (Cri) 330): This court followed the Kerala High Court's decision, emphasizing that Section 69(2) does not apply to criminal complaints under Section 138 of the NI Act. The criminal complaint is not equivalent to a suit for enforcing contractual rights.- Andhra Pradesh High Court (2000 SCC OnLine AP 748): Contrarily, this court held that the bar under Section 69(2) applies to criminal cases under Section 138 of the NI Act, as the explanation to Section 138 requires the debt to be legally enforceable, which is not possible for an unregistered firm.Supreme Court's Clarification:- BSI Ltd. v. Gift Holdings Pvt. Ltd. (2000 SCC (Cri) 538): The Supreme Court clarified that criminal prosecution under Section 138 is not for the recovery of money but for bringing the offender to penal liability. Thus, Section 69(2) of the Partnership Act, which applies to civil suits, does not bar criminal proceedings under Section 138 of the NI Act.Conclusion:The court concluded that the decisions of the Kerala, Karnataka, and Punjab & Haryana High Courts, which held that Section 69(2) of the Partnership Act does not bar unregistered firms from maintaining complaints under Section 138 of the NI Act, laid down the correct law. Consequently, the petitioner's argument that the complaint was not maintainable due to the complainant being an unregistered firm was rejected. The petition and application were dismissed.
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