Partner Liability - The Legal Chamber

The Supreme Court ruled that in cases under Section 138 of the Negotiable Instruments Act, a partnership firm need not be separately arraigned as an accused if its partners are prosecuted. The notice to partners constitutes notice to the firm, as partners are jointly and severally liable. The Court clarified that unlike companies, partnership firms lack a separate legal identity, making partners directly liable. The judgment distinguishes between vicarious liability (for companies) and joint liability (for firms), upholding the complaint’s validity despite the firm’s omission. The High Court’s order quashing the complaint was set aside. Facts Of The Case: The appellant, Dhansingh Prabhu, advanced a loan of ₹21 lakh to the respondents, Chandrasekar and another, who were partners of the fi...

The Supreme Court held that a partner's retirement from a registered firm under the Indian Partnership Act, 1932, requires strict compliance with Section 72—including public notice publication and Registrar of Firms updates—to absolve liability under Section 138 of the Negotiable Instruments Act, 1881. Non-compliance renders retirement legally ineffective. The High Court erred under Section 482 CrPC by deciding factual disputes (e.g., retirement date/liability) prematurely, as these require trial evidence. Signatory status is irrelevant for partner liability under Section 141 NI Act if involvement in firm affairs is alleged. Facts Of The Case: Shivappa Reddy (Appellant) filed a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, against M/s AVS Constructions (Ac...

Tag: Partner Liability

Supreme Court Clarifies: Partners Liable for Bounced Cheques Even If Firm Isn’t Named

Cheque Issued After Retirement? Supreme Court Says Partner Still Liable Without Proper Notice