Cheque Bounce: Is it necessary to make unregistered firm an accused?

People have doubt whether an unregistered Partnership Firm can also be brought within the purview of Section 141 of the Negotiable Instruments Act, 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.

The doubt arises because according to section 69 of the Indian Partnership Act, of 1932, any suit filed by or against an unregistered partnership firm concerning a third party would be expressly barred if – on the date of the institution – the suit is not a registered firm under the Partnership Act.  There were arguments, in view of section 69 of the Indian Partnership Act, of 1932 that the firm need not be made as an accused and the complaint can be filed straight away against the partners.

The Supreme Court, after consideration of various judgments and facts, held the following in respect of Sections, 138 and 141 of the NI Act vis-à-vis vicarious liability:

In this regard, the Bombay High Court recently held that an unregistered partnership firm can be made an accused in a cheque dishonour case under the Negotiable Instrument Act, of 1881. Justice Anil Pansare of the Nagpur bench observed that the status of registration of the partnership firm is irrelevant in proceedings for cheque dishonour under the NI Act.

The Supreme Court, after consideration of various judgments and facts, held the following in respect of Sections, 138 and 141 of the NI Act vis-à-vis vicarious liability:

As per Section 138 of the Negotiable Instruments Act, 1881, an offence is committed no sooner than a cheque drawn by the accused on an account maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the Bank.

For the purpose of Section 141 of the NI Act, a firm comes within the ambit of a company. While interpreting the provision of Section 141 of N.I. Act, the Hon’ble Supreme Court has categorically held that the complaint cannot be maintained against the directors of the Company, without making the company an accused person. This concept has been extended even to Partnership Firms. The registration or non-registration of the Partnership Firm will have no bearing insofar as 141 of the Negotiable Instruments Act is concerned.

The Hon’ble Supreme Court in Aneeta Hada. Vs. Godfather Travels and Tours Private Limited reported in 2012(5) SCC 661, has now settled the law to the effect that a complaint under Section 138 of the Negotiable Instruments Act, cannot be maintained without issuing a statutory notice to the Company and without adding the Company as an accused, only as against the directors of the Company. The same law has been made applicable even to the partnership firm in N. Elangovan. Vs. C. Ganesan reported in 2014(4) MLJ (Crl) 517.

In M/s. Haldiram Bhujjawala and another v. M/s. Anand Kumar Deepak Kumar and another, AIR 2000 SC 1287, the Hon’ble Supreme Court reiterated the position that a Suit by an unregistered firm is not barred under Section 69(2) of the Partnership Act if a statutory right or a common law right is being enforced.