Prosecution of Partners/Directors without arraigning firm/company as accused for dishonour of cheque not maintainable u/s 138 of NI Act: SC

Dilip Hariramani Vs Bank of Baroda (Supreme Court of India)

It is common knowledge that complaint under section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques are usually made against the directors of the company or the partners of the partnership firm and the company or the partnership firm are not arraigned as accused. In a recent judgment of the Apex Court in Criminal Appeal No. 767 of 2022 Dilip Hariramani vs. Bank of Baroda decided on May 9, 2022, the Court has quashed the proceedings u/s 138 of the NI Act against the partners as non maintainable.

The facts of the case are that the partnership firm M/s Global Packaging took loan from Bank of Baroda and the cheques issued by the firm for part payment of loan were dishonoured and proceedings  u/s 138 of the NI Act were filed against the partners Dilip Hariramani & Simaiya Hariramani, in their individual capacity, as being liable for the default as per section 20 of the Partnership Act 1932. Both the partners were convicted by the Judicial Magistrate under Section 138 of the NI Act and sentenced to imprisonment for six months &  asked to pay Rs. 97,50,000/- as compensation under Section 357(3) of CrPC.

The Sessions Judge on appeal modified the sentence but enhanced the compensation. The High Court of Chhattisgarh dismissing the revision held that the liability under the NI Act is only upon the partners who are responsible for the firm for conduct of its business. The Court also took note that both the partners had furnished guarantees of the amount borrowed by the Firm from the Bank. The High Court held thus:

“15. The only question raised in this revision petition is that the prosecution of the applicants in personal capacity, was not maintainable, appears to be out of place in view of the discussions, which has been made hereinabove. It is liability of a person as a partner of a firm, that has to be given emphasis. Lapse to make a proper mention in the cause title of the complaint would not by itself dis-entitle, the complainant, who has a claim to make and who has entitlement to file a complaint against the partners of the firm. The cause title of the complaint of course does not mention other description of the applicant, but the body of the plaint clearly mentions that the applicants are the partners of M/s. Global Packaging.

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