LexDHANASINGH PRABHU versus CHANDRASEKAR & ANOTHER
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[2025] 7 S.C.R. 655 : 2025 INSC 831 Dhanasingh Prabhu v. Chandrasekar & Another (Criminal Appeal No. 2994 of 2025) 14 July 2025 [B.V. Nagarathna* and Satish Chandra Sharma, JJ.] Issue for Consideration Whether the High Court was right in dismissing the complaint on the ground that the name of the partnership firm was not mentioned in the statutory notice issued by the appellant/complainant to the respondents u/s.138 of the Negotiable Instruments Act, 1881 and was also not arraigned as an accused in the complaint filed by the appellant/complainant. Headnotes† Negotiable Instrument Act, 1881 – ss.138, 141 – Partnership Act, 1932 – Appellant-complainant advanced a loan of Rs.21,00,000/- to the respondent nos.1 and 2 (a partneship firm) for business purposes – In order to discharge debt, a cheque was issued in the name of the partneship firm signed by respondent no.1 – Cheque was returned as dishonoured – Appellant-complainant issued a statutory notice to the respondents – Thereafter, the appellant-complainant filed a complaint before the trial Court – Respondents filed petition u/s.482 CrPC for quashing of complaint – The High Court quashed the complaint on the ground that while the cheque was issued on behalf of the partnership firm, no statutory notice was issued to the partnership firm and it was also not arraigned as an accused in the complaint – According to the High Court, the rigours of s.141 of the Act were not complied with – Correctness: Held: 1. The High Court was not right in rejecting or dismissing the complaint for the reason that the partnership firm was not arraigned as an accused in the complaint or that notice had not been issued to it u/s.138 of the Act – The notice issued to the partners of the firm in the instant case shall be construed to be a notice issued to the partnership firm – The complainant herein has not arraigned * Author 656 [2025] 7 S.C.R. Supreme Court Reports the firm but has arraigned the partners of the firm as accused and has also issued notice to them; therefore, the defect, if any, is not significant or incurable in these circumstances – Permission is granted to arraign the partnership firm as an accused in the complaint. [Paras 10, 6.10] 2. A partnership firm, unlike a company registered under the Indian Companies Act or a limited liability partnership registered under the Limited Liability Partnership Act, 2008, is not a distinct legal entity and is only a compendium of its partners – Even the registration of a firm does not mean that it becomes a distinct legal entity like a company – The firm name is a convenient method of describing a group of persons associated together in business at a certain point of time: no more or no less – 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 – 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 – If a partnership firm is liable for the offence u/s.138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally. [Paras 8, 8.2, 9.7, 9.8] Partnership Act, 1932 – s.4 – Companies Act, 2013 – s.2(2) s.9 – Difference between a partnership firm and a company – Discussed. Partnership Act, 1932 – Companies Act, 1956 or 2013 – A Partnership firm may not be a legal entity in the sense of a corporation or a company: Held: A firm is not an entity of persons in law but is merely an association of individuals and firm name is only a collective name of those individuals who constitute the firm – In other words, the firm name is merely an expression, only a compendious mode of designating the persons who have agreed to carry on business in partnership – Thus, a firm may not be a legal entity in the sense of a corporation or a company incorporated under the Companies [2025] 7 S.C.R. 657 Dhanasingh Prabhu v. Chandrasekar & Another Act, 1956 or 2013, but it is still a
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