Supreme Court: Merely Putting Forth Resignation Insufficient For Discharging Liability Of A Partner In A Partnership Firm
The Supreme Court set aside an Order of the High Court that had quashed proceedings against a former partner of a firm in a cheque bounce case.
Justice Abhay S Oka & Justice Augustine George Masih, Supreme Court
The Supreme Court held that merely putting forth a resignation is insufficient for discharging the liability of a partner of the partnership Firm as an authorised signatory under the NI Act unless a proper entry to the said effect has been given effect to.
The Court set aside an Order of the Karnataka High Court that had quashed proceedings against a former partner of a firm in a case concerning the dishonour of a cheque. The Appeal challenged the Order by the Single Bench of the High Court, which had allowed a Petition filed under Section 482 of the CrPC. The Petition had challenged proceedings arising from a complaint filed by the Appellant under Section 200 of the CrPC for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
A Bench of Justice Abhay S Oka and Justice Augustine George Masih held, “Merely putting forth a resignation or the partners entering into an agreement or drafting a deed or/and accepting the resignation of a partner of the Firm is insufficient for discharging the liability of a partner of the Firm unless a proper entry to the said effect after the publication has been given effect to with the same, having been recorded in the Register of Firms in the office of the Registrar of Firms as provided for in Section 63 of Partnership Act.”
Senior Advocate Devadatt Kamat appeared for the Appellant, while Senior Advocate Swarupama Chaturvedi represented the Respondent.
Brief Facts
The complaint was filed by the Appellant against M/s AVS Constructions, a Partnership Firm (Accused No.1), and its partners (Accused No.4/Respondent). The complaint alleged dishonour of twelve cheques issued by Accused No.1 for the refund of a sale consideration.
The Respondent subsequently filed a Petition under Section 482 of the CrPC, contending that proceedings against him could not continue as he had ceased to be a partner of the Partnership Firm.
Court’s Reasoning
The Supreme Court remarked, “Since the Partnership Firm (Accused No.1) is a Firm registered with the Registrars of Firms, the provisions of the Partnership Act need to be referred to. A perusal of Section 72 of the Partnership Act would show that notice of retirement must be given to the Registrar of Firms under Section 63 and by publication in the Official Gazette, and in at least one vernacular newspaper circulated in the district where the Firm to which it relates has its place or principal place of business, such notice needs to be published.”
“This should relate to the retirement of a partner, which includes admission, expulsion, or resignation from the Firm in any manner that is including or excluding a partner in a partnership Firm. Section 32 of the Partnership Act deals with the retirement of a partner. In addition, Section 62 of the Partnership Act deals with the information to be submitted with regard to the change in the names and addresses of the partners to the Registrar of Firms. What, therefore, is mandated under the Statute is that if any registered Firm intends to include or exclude by way of resignation, expulsion or addition of any partner in the Firm, an intimation to the said effect has to be forwarded and conveyed to the Registrar of Firms,” the Court explained.
“All these aspects are mixed questions of fact and law touching on the anvil of disputed questions calling for proof by way of evidence, which cannot be gone into and decided in a proceeding under Section 482 CrPC. Such matters require the parties to lead evidence as per their respective stands, and hence, calling for no interference by the High Court. Without further going into the details of the pleadings relatable to the facts, we are of the view that the High Court has erred in law by exceeding its jurisdiction while exercising its powers under Section 482 CrPC,” the Bench further remarked.
Consequently, the Court ordered, “In view of the above, the present appeal is allowed. The order dated 23.09.2023 passed by the High Court is hereby set aside. Proceedings before ACMM, Bengaluru in CC No.17788/2020 are restored. Trial Court is directed to proceed in accordance with the law.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: Shivappa Reddy v. S. Srinivasan (Neutral Citation: 2025 INSC 729)
Appearance:
Appellant: Senior Devadatt Kamat; AOR Nishanth Patil; Advocates Raghunath Reddy, Ayush P Shah, Nachiketh R Reddy, Harsh Pandey, Revanta Solanki, Ajay Desai and Arijit Dey
Respondent: Senior Advocate Swarupama Chaturvedi; AOR Anil Katiyar; Advocates Kanika and Shashank Bajpai
