Is it mandatory to arraign firm as accused to make partner liable for dishonor of cheque under Ss. 138/141 of NI Act? HC explains

Uttarakhand High Court

Uttaranchal High Court: Alok Kumar Verma, J., addressed a matter revolving around dishonour of cheque.

Appellant-Complainant preferred an appeal against the decision of the trial court wherein the respondent accused was acquitted from the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.


Accused had requested money for his business work from the complainant stating that he will return the same as early as possible. An amount of Rs 19,45,000 was deposited from time to time through NEFT/RTGS and Rs 55,000 through cash payment on credit. Further, a sum of Rs 1,90,000 was deposited by the complainant through Gopal Singh (PW-2). In total, a sum of Rs 20,00,000 was given to the respondent on credit.

On demanding the said amount, accused issued a cheque but the same was dishonoured by the bank with the note of “exceed agreement”.

Legal notice was sent to the accused and served upon the accused on 17-11-2017. Further, since no payment was forthcoming pursuant to the said demand notice, a complaint case was filed against the accused under Section 138 of the NI Act, 1881.

In the cross-examination before the trial court, defence denied accused’s signature on the cheque. In the cross-examination of the complainant, the defence was that there was no transaction between the complainant and the accused and all the transactions of the complainant were with his brother Mohan Prasad Purohit and in the absence of his brother Mohan Prasad Purohit, the complainant had taken seven cheques from the shop of his brother. With respect to the cheque-in-question, which was dishonoured, the defence was that the said cheque was amongst the seven cheques, which was misused by the complainant.

Under Section 139 NI Act, once a cheque has been signed and issued in favour of the holder, there is a statutory presumption that it is issued in discharge of a legally enforceable debt or liability. However, presumption is a rebuttable one.

In Rangappa v. Sri Mohan (2010) 11 SCC 441, Supreme Court has held that in view of Section 139, it has to be presumed that a cheque is issued in discharge of any debt or other liability.

Respondent-Accused denied signature on the said cheque and accused did not lead any evidence in support of his plea.

Mere statement of the accused may not be sufficient to rebut the presumption.

Therefore, this Court does not see any basis in the contention of the counsel for the respondent that the respondent-accused has been successful in creating doubt in the mind of the Court with regard to the existence of the legally enforceable debt or liability.

Section 141 of the Act, 1881 stipulates the liability for the offence punishable under Section 138 of the Act, 1881 when the person committing such an offence happens to be a company i.e. when the drawer of the cheque happens to be a company. For the purpose of Section 141 of the Act, 1881, a firm comes within the ambit of a company.

Supreme Court in the case of Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661 considered the question, “whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused.”

In Himanshu v. B. Shivamurthy, (2019) 3 SCC 797, Supreme Court held that in absence of the company being arraigned as an accused, prosecution of the Director of the Company for the cheque bounce under Section 138 of the Act, 1881 was not maintainable.

Hence, in view of the above decisions of the Supreme Court, Bench expressed that,

“…if the cheque had been issued by the firm which was subsequently dishonoured, a partner of the firm would not be liable for prosecution under Section 138 of the Act, 1881 without the firm being arraigned as an accused.”

In the present complainant, the firm was not arraigned as an accused. Therefore, the appeal was liable to be dismissed.         [Ramesh Nagarkoti v. Kedar Datt Purohit, 2021 SCC OnLine Utt 745, decided on 3-03-2021]

Advocates before the Court:

Counsel for the appellant: Mr Sanjay Kumar.

Counsel for the respondent: Mr Yogesh Kumar Pacholia


  • Wrong and misleading heading..this is not the case of proprietorship firm..the heading should read partner instead of proprietor..the partnership firm was not arrayed as party..the individual and sole proprietorship firm are same and only the allegations along with supporting document are required to be made

    • Thank you for pointing out this inadvertent error. It has been corrected.

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