Satyaveer Singh v. Rakesh Sharma, under section

Station: Uttar, District: Firozabad, pending before Additional Civil Judge (S.D.)/A.C.J.M., Firozabad as well as summoning order dated 07.08.2024 passed therein.

3. The case of the applicant is that a complaint stood lodged on 16.12.2023 by the O.P. No.2 under Section 138 of N.I. Act against the applicant with an allegation that with respect to discharge of a liability, the applicant herein had drawn two cheques bearing number "223191" and "223192" dated

13.09.2023 for an amount Rs.1,00,000/- and Rs.8,00,000/-, respectively, which on presentation in the bank on 16.10.2023 and 18.10.2023 came to be dishonoured 18.10.2023 and 20.10.2023 and thereafter on the assurance of the applicant, the cheques were again presented on 06.11.2023 and

08.11.2023, which came to be dishonoured 08.11.2023 and 10.11.2023 followed by a statutory demand notice dated 22.11.2023 and a complaint under Section 138 of the N.I. Act on 16.12.2023 and the applicant came to be summoned on 07.08.2024 under Section 138 of the N.I. Act. Learned 2 NA528 No. 35223 of 2025 counsel for the applicant has submitted that the summoning order cannot be sustained for more than on reasons, firstly, the cheques have been drawn on behalf of the Company, namely Sri Mahalaxmi Trading Company, but in the complaint, the company has not been arraigned as an accused. Secondly, though the cheques stood dishonoured on an earlier occasion, when presented in the bank on 16.10.2023, 18.10.2023 and on 18.10.2023 and

20.10.2023, but no statutory demand notice came to be issued, however, the when the cheques were subsequently dishonoured on 08.11.2023 and

10.11.2023, statutory demand notice came to be issued on 22.11.2023, thus he submits that in absence of any statutory demand notice issued, at the time of the first dishonour, the entire proceeding is bound to fail.

4. Learned A.G.A. on the other hand submits that once the cheque stood drawn and it has been dishonoured, then the presumption under Section 139 of the N.I. Act would be there.

5. I have heard the the submissions so made across the Bar and perused the record carefully.

6. Apparently, the allegation in the complaint is that with respect to discharge of a liability, two cheques of an amount of Rs.1,00,000/- and Rs.8,00,000/- came to be drawn, which were earlier dishonoured on

18.10.2023 and 20.10.2023 and on re-presentation the same were again dishonoured on 08.11.2023 and 10.11.2023. A perusal of the cheques would reveal that though the cheques had been issued for Sri Mahalaxmi Trading Company, but the applicant happens to be the proprietor of the firm in question. Once the position being so, there is no difference between the proprietorship firm and the proprietor. Thus there was no occasion to arraign the proprietorship firm as a party. In Dhanasingh Prabhu vs. Chandrasekar & another, Criminal Appeal No. Nil of 2025 (arising out of Special Leave Petition (Criminal) No.5706 of 2024), in paragraphs-9.6 to 9.11, the Hon'ble Apex Court has observed as under:- "9.6 On a conjoint reading of the various clauses of Section 141, what emerges is that the expression “company” has been used in an expansive way to include not just a company incorporated under the provisions of the Companies Act stricto sensu but also any body corporate such as a statutory company as well as other artificial juristic entity such as a partnership firm or other association of individuals. Hence, 3 NA528 No. 35223 of 2025 the expression “director” in sub-section (2) of Section 141 is not restricted to a director of an incorporated company or a statutory body, but also includes a partner of a firm. The expression “director” in sub-section (2) of Section 141 of the Act in relation to a firm means a partner, which is also a legislative device adopted by the Parliament knowing fully well and being conscious of the fact that a partnership firm, jurisprudentially speaking, does not stand on par with a director of a body corporate. Since the Parliament has used the expression “company” encompassing all types of juristic persons, it was necessary to give an expanded definition to the expression “director” in relation to a firm to mean a partner in the firm. Therefore, the inclusion of a firm within the meaning of the expression “company” is by a legal fiction and by way of a legislative device only for the purpose of creating a liability on the partners of the firm, which in any case, they are liable under the law of partnership in India. But the definition of the word company including a partnership firm has been incorporated in the Explanation for the sake of convenience, as otherwise a similar provision would have to be inserted for the very same purposes. Instead of replicating the same definition for different kinds of juristic entities, the Parliament has thought it convenient to add an Explanation to define a company for the purpose of Section 141 of the Act in the context of an offence committed by, inter alia, a company, as understood within the meaning of the Companies Act, and also include a firm or other association of individuals within the definition of company. Similarly, under clause (b) of the explanation, the expression “director”, in relation to a firm, means a partner in the firm.

9.7 This also demonstrates the fact that while a director is a separate persona in relation to a company, in the case of a partnership firm, the partner is not really a distinct legal persona. This is because a partnership firm is not really a legal entity separate and distinct as a company is from its directors but can have a legal persona only when the partnership firm is considered along with its partners. Thus, the partnership firm has no separate recognition either jurisprudentially or in law apart from its partners. Therefore, 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. Therefore the partners of the firm are liable for the dishonour of a cheque, even though the cheque may have been issued in the name of the firm and the offence is committed by the firm. Therefore, in law and in jurisprudence, when a partnership firm is proceeded against, in substance, the partners are liable and the said liability is joint and several and is not vicarious. This is unlike a company which is liable by itself and since it is an artificial juristic 4 NA528 No. 35223 of 2025 entity, the persons in charge of the affairs of the company or who conduct its business only become vicariously liable for the offence committed by the company.

9.8 However, jurisprudentially speaking, the partners of a partnership firm constitute the firm and a firm is a compendious term for the partners of a firm. This is opposed to the position of a director in a company which is a body corporate stricto sensu and such a company is a separate juristic entity vis-à-vis the directors. On the other hand, a partnership firm has no legal recognition in the absence of its partners. If a partnership firm is liable for the offence under Section 138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally. This underlying distinction between a partnership firm and a company which is a body corporate has to be borne in mind while dealing with an offence committed by a company or a partnership firm, as the case may be, within the meaning of Section 138 read with Section 141 of the Act. To reiterate, in the case of a partnership firm, there is no concept of vicarious liability of the partners as such. The liability is joint and several because a partnership firm is the business of partners and one cannot proceed against only the firm without the partners being made liable.

9.9 Therefore, 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. The accused in such a case would in substance be the partners of the partnership firm along with the firm itself. Since the liability is joint and several, even in the absence of a partnership firm being proceeded against by the complainant by issuance of legal notice as mandated under Section 138 of the Act or being made an accused specifically in a complaint filed under Section 200 of CrPC, (equivalent to Section 223 of the BNSS), such a complaint is maintainable.

9.10 Thus, when it is a case of an offence committed by a company which is a body corporate stricto sensu, the vicarious liability on the categories of persons mentioned in sub-section (1) and sub-section (2) of Section 141 of the Act accordingly would be proceeded against and liable for the offence under Section 138 of the Act. In the case of a partnership firm on the other hand, when the offence has been proved against a partnership firm, the firm per se would not be liable, but liability would inevitably extend to the partners of the firm inasmuch as they would be personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm.

9.11 To reiterate, 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 5 NA528 No. 35223 of 2025 of the Act would make the partners of the firm jointly and severally liable with the firm. If, on the other hand, the Parliament intended that the partners of the firm be construed as separate entities for the purpose of penalty, then it would have provided so by expressly stating that the firm, as well as the partners, would be liable separately for the offence under Section 138 of the Act. Such an intention does not emanate from Section 141 of the Act as the offence proved against the firm would amount to the partners of the firm also being liable jointly and severally with the firm. Therefore, there is no separate liability on each of the partners unless sub- section (2) of Section 141 applies, when negligence or lack of bona fides on the part of any individual partner of the firm has been proved." As regards the second submission, so made by the applicant that the applicant was not issued a statutory demand notice when the cheques were for the very first time came to be dishonoured, though a statutory demand notice came to be issued, when the cheques stood dishonoured on the second occasion, thus there happens to be infraction of the provisions contained under Section 138/142 of the N.I. Act is concerned, the same is preposterous for the simple reason that in M.S.R. Leathers vs. Palaniappan, (2013) 1 SCC 177, the following was observed: - "23. There is, in our view, nothing either in Section 138 or Section 142 to curtail the said right of the payee, leave alone a forfeiture of the said right for no better reason than the failure of the holder of the cheque to institute prosecution against the drawer when the cause of action to do so had first arisen. Simply because the prosecution for an offence under Section 138 must on the language of Section 142 be instituted within one month from the date of the failure of the drawer to make the payment does not in our view militate against the accrual of multiple causes of action to the holder of the cheque upon failure of the drawer to make the payment of the cheque amount. In the absence of any juristic principle on which such failure to prosecute on the basis of the first default in payment should result in forfeiture, we find it difficult to hold that the payee would lose his right to institute such proceedings on a subsequent default that satisfies all the three requirements of Section 138."

7. Moreover, presumption under Section 139 of N.I. Act is there.

8. Accordingly, interference is declined. The application is disposed of leaving it open to the applicant to contest the proceedings before the court below while taking all the legal and factual grounds and this Court has no 6 NA528 No. 35223 of 2025 reason to disbelieve that the court below shall consider the same in correct perspective. September 15, 2025 N.S.Rathour (Vikas Budhwar,J.) NIPENDRA SINGH RATHOUR High Court of Judicature at Allahabad

Station: Uttar, District: Firozabad, pending before Additional Civil Judge (S.D.)/A.C.J.M., Firozabad as well as summoning order dated 07.08.2024 passed therein.

3. The case of the applicant is that a complaint stood lodged on 16.12.2023 by the O.P. No.2 under Section 138 of N.I. Act against the applicant with an allegation that with respect to discharge of a liability, the applicant herein had drawn two cheques bearing number "223191" and "223192" dated

13.09.2023 for an amount Rs.1,00,000/- and Rs.8,00,000/-, respectively, which on presentation in the bank on 16.10.2023 and 18.10.2023 came to be dishonoured 18.10.2023 and 20.10.2023 and thereafter on the assurance of the applicant, the cheques were again presented on 06.11.2023 and

08.11.2023, which came to be dishonoured 08.11.2023 and 10.11.2023 followed by a statutory demand notice dated 22.11.2023 and a complaint under Section 138 of the N.I. Act on 16.12.2023 and the applicant came to be summoned on 07.08.2024 under Section 138 of the N.I. Act. Learned 2 NA528 No. 35223 of 2025 counsel for the applicant has submitted that the summoning order cannot be sustained for more than on reasons, firstly, the cheques have been drawn on behalf of the Company, namely Sri Mahalaxmi Trading Company, but in the complaint, the company has not been arraigned as an accused. Secondly, though the cheques stood dishonoured on an earlier occasion, when presented in the bank on 16.10.2023, 18.10.2023 and on 18.10.2023 and

20.10.2023, but no statutory demand notice came to be issued, however, the when the cheques were subsequently dishonoured on 08.11.2023 and

10.11.2023, statutory demand notice came to be issued on 22.11.2023, thus he submits that in absence of any statutory demand notice issued, at the time of the first dishonour, the entire proceeding is bound to fail.

4. Learned A.G.A. on the other hand submits that once the cheque stood drawn and it has been dishonoured, then the presumption under Section 139 of the N.I. Act would be there.

5. I have heard the the submissions so made across the Bar and perused the record carefully.

6. Apparently, the allegation in the complaint is that with respect to discharge of a liability, two cheques of an amount of Rs.1,00,000/- and Rs.8,00,000/- came to be drawn, which were earlier dishonoured on

18.10.2023 and 20.10.2023 and on re-presentation the same were again dishonoured on 08.11.2023 and 10.11.2023. A perusal of the cheques would reveal that though the cheques had been issued for Sri Mahalaxmi Trading Company, but the applicant happens to be the proprietor of the firm in question. Once the position being so, there is no difference between the proprietorship firm and the proprietor. Thus there was no occasion to arraign the proprietorship firm as a party. In Dhanasingh Prabhu vs. Chandrasekar & another, Criminal Appeal No. Nil of 2025 (arising out of Special Leave Petition (Criminal) No.5706 of 2024), in paragraphs-9.6 to 9.11, the Hon'ble Apex Court has observed as under:- "9.6 On a conjoint reading of the various clauses of Section 141, what emerges is that the expression “company” has been used in an expansive way to include not just a company incorporated under the provisions of the Companies Act stricto sensu but also any body corporate such as a statutory company as well as other artificial juristic entity such as a partnership firm or other association of individuals. Hence, 3 NA528 No. 35223 of 2025 the expression “director” in sub-section (2) of Section 141 is not restricted to a director of an incorporated company or a statutory body, but also includes a partner of a firm. The expression “director” in sub-section (2) of Section 141 of the Act in relation to a firm means a partner, which is also a legislative device adopted by the Parliament knowing fully well and being conscious of the fact that a partnership firm, jurisprudentially speaking, does not stand on par with a director of a body corporate. Since the Parliament has used the expression “company” encompassing all types of juristic persons, it was necessary to give an expanded definition to the expression “director” in relation to a firm to mean a partner in the firm. Therefore, the inclusion of a firm within the meaning of the expression “company” is by a legal fiction and by way of a legislative device only for the purpose of creating a liability on the partners of the firm, which in any case, they are liable under the law of partnership in India. But the definition of the word company including a partnership firm has been incorporated in the Explanation for the sake of convenience, as otherwise a similar provision would have to be inserted for the very same purposes. Instead of replicating the same definition for different kinds of juristic entities, the Parliament has thought it convenient to add an Explanation to define a company for the purpose of Section 141 of the Act in the context of an offence committed by, inter alia, a company, as understood within the meaning of the Companies Act, and also include a firm or other association of individuals within the definition of company. Similarly, under clause (b) of the explanation, the expression “director”, in relation to a firm, means a partner in the firm.

9.7 This also demonstrates the fact that while a director is a separate persona in relation to a company, in the case of a partnership firm, the partner is not really a distinct legal persona. This is because a partnership firm is not really a legal entity separate and distinct as a company is from its directors but can have a legal persona only when the partnership firm is considered along with its partners. Thus, the partnership firm has no separate recognition either jurisprudentially or in law apart from its partners. Therefore, 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. Therefore the partners of the firm are liable for the dishonour of a cheque, even though the cheque may have been issued in the name of the firm and the offence is committed by the firm. Therefore, in law and in jurisprudence, when a partnership firm is proceeded against, in substance, the partners are liable and the said liability is joint and several and is not vicarious. This is unlike a company which is liable by itself and since it is an artificial juristic 4 NA528 No. 35223 of 2025 entity, the persons in charge of the affairs of the company or who conduct its business only become vicariously liable for the offence committed by the company.

9.8 However, jurisprudentially speaking, the partners of a partnership firm constitute the firm and a firm is a compendious term for the partners of a firm. This is opposed to the position of a director in a company which is a body corporate stricto sensu and such a company is a separate juristic entity vis-à-vis the directors. On the other hand, a partnership firm has no legal recognition in the absence of its partners. If a partnership firm is liable for the offence under Section 138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally. This underlying distinction between a partnership firm and a company which is a body corporate has to be borne in mind while dealing with an offence committed by a company or a partnership firm, as the case may be, within the meaning of Section 138 read with Section 141 of the Act. To reiterate, in the case of a partnership firm, there is no concept of vicarious liability of the partners as such. The liability is joint and several because a partnership firm is the business of partners and one cannot proceed against only the firm without the partners being made liable.

9.9 Therefore, 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. The accused in such a case would in substance be the partners of the partnership firm along with the firm itself. Since the liability is joint and several, even in the absence of a partnership firm being proceeded against by the complainant by issuance of legal notice as mandated under Section 138 of the Act or being made an accused specifically in a complaint filed under Section 200 of CrPC, (equivalent to Section 223 of the BNSS), such a complaint is maintainable.

9.10 Thus, when it is a case of an offence committed by a company which is a body corporate stricto sensu, the vicarious liability on the categories of persons mentioned in sub-section (1) and sub-section (2) of Section 141 of the Act accordingly would be proceeded against and liable for the offence under Section 138 of the Act. In the case of a partnership firm on the other hand, when the offence has been proved against a partnership firm, the firm per se would not be liable, but liability would inevitably extend to the partners of the firm inasmuch as they would be personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm.

9.11 To reiterate, 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 5 NA528 No. 35223 of 2025 of the Act would make the partners of the firm jointly and severally liable with the firm. If, on the other hand, the Parliament intended that the partners of the firm be construed as separate entities for the purpose of penalty, then it would have provided so by expressly stating that the firm, as well as the partners, would be liable separately for the offence under Section 138 of the Act. Such an intention does not emanate from Section 141 of the Act as the offence proved against the firm would amount to the partners of the firm also being liable jointly and severally with the firm. Therefore, there is no separate liability on each of the partners unless sub- section (2) of Section 141 applies, when negligence or lack of bona fides on the part of any individual partner of the firm has been proved." As regards the second submission, so made by the applicant that the applicant was not issued a statutory demand notice when the cheques were for the very first time came to be dishonoured, though a statutory demand notice came to be issued, when the cheques stood dishonoured on the second occasion, thus there happens to be infraction of the provisions contained under Section 138/142 of the N.I. Act is concerned, the same is preposterous for the simple reason that in M.S.R. Leathers vs. Palaniappan, (2013) 1 SCC 177, the following was observed: - "23. There is, in our view, nothing either in Section 138 or Section 142 to curtail the said right of the payee, leave alone a forfeiture of the said right for no better reason than the failure of the holder of the cheque to institute prosecution against the drawer when the cause of action to do so had first arisen. Simply because the prosecution for an offence under Section 138 must on the language of Section 142 be instituted within one month from the date of the failure of the drawer to make the payment does not in our view militate against the accrual of multiple causes of action to the holder of the cheque upon failure of the drawer to make the payment of the cheque amount. In the absence of any juristic principle on which such failure to prosecute on the basis of the first default in payment should result in forfeiture, we find it difficult to hold that the payee would lose his right to institute such proceedings on a subsequent default that satisfies all the three requirements of Section 138."

7. Moreover, presumption under Section 139 of N.I. Act is there.

8. Accordingly, interference is declined. The application is disposed of leaving it open to the applicant to contest the proceedings before the court below while taking all the legal and factual grounds and this Court has no 6 NA528 No. 35223 of 2025 reason to disbelieve that the court below shall consider the same in correct perspective. September 15, 2025 N.S.Rathour (Vikas Budhwar,J.) NIPENDRA SINGH RATHOUR High Court of Judicature at Allahabad