A common question arises whether an unregistered partnership firm can be made an accused under Section 141 of the Negotiable Instruments Act, 1881 (NI Act), and whether the firm itself must be arraigned as an accused along with its partners for cheque bounce offences under Section 138.
Historically, ambiguity persisted due to Section 69 of the Indian Partnership Act, 1932, which bars unregistered firms from instituting suits concerning third-party rights. This provision led to arguments that complaints can be continued solely against the partners under the NI Act, without needing to arraign the partnership firm, especially if unregistered.
Supreme Court’s 2025 Ruling: New Legal Clarity
In a landmark decision delivered on 14 July 2025 (Dhanasingh Prabhu v. Chandrasekar), the Supreme Court clarified that a complaint under Section 138 of the NI Act remains maintainable even if only the partners are named as accused and the partnership firm itself (whether registered or unregistered) is not made an accused party. The bench underscored the fundamental point that, for ordinary (non-LLP) partnerships, the firm is not a separate legal entity apart from its partners. Thus, notice to the partners is deemed to be notice to the firm, satisfying statutory requirements under the Act.
This fresh decision confers procedural flexibility to complainants. One may proceed against the firm and its partners together, or solely against the partners. Should the need arise, the complainant can seek to implead the partnership firm during the course of proceedings.
Prior Position: Bombay High Court and Interpretations
Previously, the Bombay High Court and other High Courts had ruled that Section 141 does not distinguish between registered and unregistered partnership firms, allowing proceedings against unregistered firms as accused under the NI Act. This was considered mandatory, especially in light of the general principle of joint liability.
Implications for Litigation Strategy
The present (2025) Supreme Court ruling marks a departure from the earlier, more rigid requirement to always arraign the firm. It recognizes commercial realities and the nature of partnerships under Indian law, where partners are directly, jointly, and severally liable for the firm’s acts. Unlike directors of companies (who have vicarious liability), partners’ liability is primary under the Partnership Act and the NI Act. For litigation, this means:
- Statutory notice to the partners equates to notice to the firm.
- Complaints against partners alone are valid, even if the cheque was drawn in the firm’s name.
- Complainants may still prefer to implead both the firm and the partners, but non-arraignment of the firm is no longer fatal.
Key Case Law References
- Dhanasingh Prabhu v. Chandrasekar (SC, 2025): Supreme Court clarified maintainability against partners alone.
- Aneeta Hada v. Godfather Travels & Tours Pvt Ltd (2012): Applied to companies and extended to partnerships in subsequent cases.
- M/s Haldiram Bhujjawala v. M/s Anand Kumar Deepak Kumar (2000): Discussed statutory/enforceable rights barring Section 69 implications for statutory offences.
Takeaway for Practitioners
The current legal position (as of late 2025) is that cheque dishonour complaints under Section 138 NI Act can be validly maintained against individual partners of a firm, whether registered or unregistered, even if the partnership firm is not formally joined as an accused. However, it remains best practice to implead both the firm and its partners to avoid unnecessary procedural disputes
For further reading and in-depth case law references, practitioners and banking professionals are encouraged to consult the most recent Supreme Court judgments and corresponding High Court orders rendered in 2025.
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| CHEQUE BOUNCING AND CONSEQUENCES OF DISHONOUR OF CHEQUE EXPLAINED | CHEQUE BOUNCE: NEW PROVISIONS SEC 143 A & 148 INSERTED UNDER NI ACTS |
