Complaint Under NI Act Maintainable Against Partners Even If Partnership Firm Not Named As Accused: Supreme Court

The Supreme Court has held that a complaint under Section 138 of the Negotiable Instruments Act, 1881, can be maintained against individual partners of a firm even if the firm itself is not named as an accused. The Court noted that since partners are jointly and severally liable, proceedings against them are valid in law, and such liability does not depend on the firm being separately arraigned.

A Bench of Justice B.V. Nagarathna and Justice Satish Chandra Sharma observed, “In law and in jurisprudence, when a partnership firm is proceeded against, in substance, the partners are liable… A partnership firm in the absence of its partners cannot at all be considered to be a juristic entity in law.”

The Court added, “Even in the absence of partnership firm being named as an accused, if the partners of the partnership firm are proceeded against, they being jointly and severally liable along with the partnership firm as well as inter-se the partners of the firm, the complaint is still maintainable.”

Advocate C.B. Gururaj appeared for the Appellant, while Senior Advocate S. Nagamuthu represented the Respondents.

Brief Facts

The Appellant, who was the complainant before the Trial Court, had filed a cheque dishonour complaint against two individuals who were partners of a coir manufacturing partnership firm. According to the Appellant, a total of ₹21,00,000 was advanced by him to the firm between March and August 2019 through both cash and banking channels. The money was given for the firm’s business purposes.

In discharge of this liability, one of the Respondents (partners) issued a cheque dated from the firm’s bank account. However, when the cheque was presented the very next day, it was dishonoured with a return memo stating that the firm’s account had been frozen.

The Appellant thereafter issued a statutory demand notice under Section 138 of the NI Act. This notice was addressed to both partners individually but not to the partnership firm. A complaint was then filed under Section 138 read with Section 142 of the Act, again naming only the two partners as accused, and not the firm.

During the pendency of the case, the Respondents moved the High Court under Section 482 CrPC seeking quashing of the complaint on the ground that the statutory requirements of Sections 138 and 141 had not been complied with, since neither was notice issued to the firm nor was it named as an accused. The High Court accepted this plea and quashed the complaint entirely, holding that the failure to arraign the firm was fatal to the prosecution. Aggrieved, the Appellant challenged this order before the Supreme Court.

Reasoning of the Court

The Court distinguished between the liability framework for partnerships from that applicable to companies under Section 141 of the NI Act, and observed, “A partnership firm has no separate recognition either jurisprudentially or in law apart from its partners… The partners and the partnership firm are one and the same. The liability is joint and several and not vicarious.”

On whether failure to name the firm as an accused rendered the complaint defective, the Court clarified, “If the complainant herein has proceeded only against the partners and not against the partnership firm, we think it is not something which would go to the root of the matter so as to dismiss the complaint on that ground.”

The Court said that since the concept of vicarious liability is not applicable to partnership firms in the same way as to companies, issuing notice to the partners and making them accused was legally sufficient. It added, “Notice to the partners/accused could have been construed as notice to the partnership firm also. We say so for the reason that unlike a company which is a separate juristic entity from its directors thereof, a partnership firm comprises of its partners who are the persons directly liable on behalf of the partnership firm and by themselves.”

The Court also differentiated between the conceptual difference between partnerships and companies, noting, “While a director of a company can be vicariously liable for an offence committed by a company, insofar as a partnership firm is concerned, when the offence is committed by such a firm, in substance, the offence is committed by the partners of the firm and not just the firm per se.”

The Bench explained, “When the partnership firm is only a compendious name for the partners of the firm, any offence committed under Section 138 read with Section 141 of the Act would make the partners of the firm jointly and severally liable with the firm.”

The Court held that even though the firm was not originally arrayed as an accused, that omission was not fatal. However, in the interest of procedural propriety, it permitted the complainant to add the firm as an accused.

Accordingly, the Court set aside the High Court’s order and restored the complaint for trial.

Cause Title: Dhanasingh Prabhu V. Chandrasekar & Anr. (Neutral Citation: 2025 INSC 831)

Appearance

Appellant: AoR Sabarish Subramanian; Advocates C.B. Gururaj, Vishnu Unnikrishnan

Respondents: Senior Advocate S. Nagamuthu; AoR M.P. Parthiban; Advocates C. Paramasivam, Priyaranjani Nagamuthu, Ankur Prakash, Priyanka Singh, Bilal Mansoor, Shreyas Kaushal, S. Geyolin Selvam, Alagiri K

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