2024 (8) TMI 705 - HC - Indian Laws

Partners liable for firm's dishonored cheque but sleeping partner exempted from criminal proceedings under Section 482

Anju Khanna & Ors. Versus State (Govt of NCT of Delhi) & Anr.

Delhi HC ruled on a dishonored cheque case involving partners' liability. The court distinguished partners from company directors, noting that under ... Dishonour of Cheque - Maintainability of petition - Liability of partners - equal and efficacious remedy of appeal - Complaint not maintainable for the reason that it does not have the necessary averments against the Petitioners - whether the complaint, as framed, should be permitted to proceed ahead or should the complaint be quashed for want of necessary averments? - HELD THAT:- The position of a Partner is distinct from Director of a company. Section 18 of the Partnership Act specifically provides that a partner is an agent of the firm for the purpose of business of the firm. Section 19 states that the act of a partner which is done to carry on the business of the kind carried on by the firm, binds the firm. Section 23 states that an admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of business. Section 25 states that every partner is liable jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. In a company, every Director is not responsible for the conduct of the business of the company but in a partnership firm all the working partners are responsible for the conduct of day-to-day business of the firm as every partner is a representative of the other partners of the firm. In view of the above, the averment that an accused is a partner is sufficient to show that that partner is responsible for the conduct of the affairs of the firm. All the judgments relied on by the learned Counsel for the Petitioner, which pertains to directors of a firm, are, therefore, clearly distinguishable. A perusal of the abovementioned Section shows that until and unless a public notice of the retirement is given, a partner of the firm continues to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement. There is nothing on record to show that a public notice has been given. However, since Ms. Anju Khanna, i.e. the Petitioner No. 1 herein, was only a sleeping partner of the firm, this Court is inclined to exercise its jurisdiction under Section 482 Cr.P.C to quash the Complaint qua Ms. Anju Khanna, i.e. Petitioner No. 1 herein only. As far as Petitioners No. 2 & 3 are concerned the complaint shall proceed ahead against them. The Petition is disposed of. Issues Involved:1. Quashing of Complaint Case No. 28540/2016 under Section 138 of the Negotiable Instruments Act, 1881.2. Liability of partners under Section 138 of the NI Act.3. Specific averments required for vicarious liability under Section 141 of the NI Act.4. Distinction between the roles of partners and directors in a firm.5. Compliance with Section 32 of the Partnership Act, 1932 regarding retirement of partners.Issue-wise Detailed Analysis:1. Quashing of Complaint Case No. 28540/2016 under Section 138 of the NI Act:The petitioner sought quashing of Complaint Case No. 28540/2016, which involved dishonoured cheques issued by M/s Adigear International. The cheques were returned unpaid due to 'funds insufficient' and 'Stop Payment.' Despite a notice under Section 132 of the NI Act, the petitioners did not return the money, leading to the complaint under Section 138 of the NI Act. The petitioners' application for discharge was dismissed by the learned Metropolitan Magistrate and the Additional Session Judge.2. Liability of partners under Section 138 of the NI Act:The petitioners argued that they were not signatories of the cheques and cited Section 141 (1) of the NI Act, which requires specific roles to be attributed to partners for vicarious liability. They referenced judgments like S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Pooja Ravinder Devidasani v. State of Maharashtra to support their claim that specific averments are necessary to hold partners liable.3. Specific averments required for vicarious liability under Section 141 of the NI Act:The court examined whether the complaint contained necessary averments against the petitioners. Paragraphs 2, 7, and 10 of the complaint stated that the petitioners were partners and drawers of the dishonoured cheques, thereby liable under Sections 138 to 142 of the NI Act. The court noted that the averment of being a partner is sufficient to show responsibility for the firm's conduct, distinguishing partners from directors.4. Distinction between the roles of partners and directors in a firm:The court highlighted that partners in a firm have distinct roles compared to directors in a company. Under Sections 18, 19, 23, and 25 of the Partnership Act, 1932, partners are agents of the firm, and their actions bind the firm. The court emphasized that all working partners are responsible for the firm's day-to-day business, unlike directors of a company.5. Compliance with Section 32 of the Partnership Act, 1932 regarding retirement of partners:The petitioners presented a retirement deed dated 25.08.2013, claiming that Ms. Anju Khanna and Mr. Prem Nath Khanna had retired before the cheques were presented. However, the court found no evidence of public notice as required under Section 32 of the Partnership Act. Consequently, Ms. Anju Khanna, being a sleeping partner, was granted relief, but the complaint proceeded against the other active partners.Conclusion:The court concluded that the necessary averments were present in the complaint to proceed against Petitioners No. 2 & 3, who were active partners responsible for the firm's conduct. The complaint was quashed only for Ms. Anju Khanna, the sleeping partner, due to lack of evidence of public notice of her retirement. The petition was disposed of with these directions.