Delhi High Court | Non-Impleadment of Partnership Firm in Cheque Dishonour Case Held Curable | Section 141 NI Act Requires Firm to Be Principal Accused | Amendment Allowed Subject to Costs
Isabella Mariam
The High Court of Delhi Single Bench of Justice Amit Mahajan held that the non-impleadment of a partnership firm in proceedings under the Negotiable Instruments Act constitutes a curable defect. The Court permitted the complainant to seek amendment of the complaint for impleading necessary parties and directed that such an amendment would be considered by the trial court, subject to payment of compensatory costs. The Court dismissed the petition seeking quashing of proceedings, while granting the complainant two months to rectify the infirmities in the complaint, ensuring that adjudication proceeds on merits.
The proceedings arose from a petition filed seeking quashing of Complaint Case No. 2542/2019 pending before the Metropolitan Magistrate, South District, Saket Courts, New Delhi. The complaint had been instituted for offences under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881. The dispute stemmed from a Franchisee Agreement executed in December 2012, through which a retail outlet was to be operated at Moments Mall, Patel Road, New Delhi. The respondent company, engaged in the sale of women’s apparel and accessories under the brands “W,” “Aurelia,” and “Wishful,” alleged that substantial dues had arisen under the business arrangement. According to the allegations, products worth approximately Rs. 38,11,873/- were supplied and remained unpaid.
It was alleged that in discharge of liability, two cheques were issued—one dated 27.09.2018 for Rs. 10,00,000/- and another dated 30.09.2018 for Rs. 7,50,000/-, drawn on HDFC Bank, Kirti Nagar, New Delhi. These cheques were returned unpaid for reasons of insufficient funds as per the return memo dated 21.12.2018. Subsequently, the respondent issued a statutory legal notice on 14.01.2019 demanding payment within the statutory period of fifteen days. Upon failure to comply, a complaint under Section 138 of the NI Act was filed.
The petitioner, alleged to be the proprietor of A & A Enterprises, was summoned by the Metropolitan Magistrate by order dated 05.03.2019. Thereafter, non-bailable warrants were issued on 03.06.2022. However, the petitioner approached the High Court challenging his impleadment in his personal capacity as sole proprietor instead of as a partner of the partnership firm. The petitioner argued that A & A Enterprises was a partnership concern constituted by a deed dated 25.10.2012, involving three partners. It was further contended that the petitioner neither signed the subject cheques nor issued them, as they were signed by another partner.
The petitioner submitted that the respondent, despite being aware of the firm’s status as a partnership, had deliberately proceeded against him as a sole proprietor. The statutory notice had been issued to him in his individual capacity. The petitioner further raised a contention that the notice bore a defective date—14.01.2018—predating the issuance of cheques in September 2018. Reliance was placed on Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd. to argue that proper statutory compliance was absent.
The respondent’s counsel submitted that the petitioner had represented himself as sole proprietor while executing the Franchisee Agreement of 2012. It was contended that the petitioner had failed to disclose the actual status of the firm. Further, it was submitted that the notice dated 14.01.2019 had been duly received by the petitioner, as acknowledged in his email reply dated 28.01.2019. The respondent also argued that the amendments sought in the complaint were curable in nature and did not alter its substance, relying on precedents including U.P. Pollution Control Board v. Modi Distillery and Anil Hada v. Indian Acrylic Ltd. The respondent characterized the petition as an attempt to delay proceedings.
An Amicus Curiae, Senior Advocate Ashish Mohan, was appointed by the Court to assist in the determination of the legal question concerning amendments to complaints in proceedings under Section 138 of the NI Act. Written submissions referred to judgments such as S.R. Sukumar v. S. Sunaad Raghuram, Kunapareddy v. Kunapareddy Swarna Kumari, and U.P. Pollution Control Board v. Modi Distillery, which had held that curable infirmities could be addressed through formal amendments.
The Amicus pointed out that certain High Courts, including those of Andhra Pradesh, Madhya Pradesh, and Allahabad, had allowed such amendments, whereas the High Courts of Uttarakhand and Bombay had rejected complaints that failed to implead the firm or company concerned.
Justice Amit Mahajan observed that “this Court can quash the proceedings in NI Act cases, in exercise of its inherent jurisdiction under Section 482 of the CrPC, if such unimpeachable material is brought forth by the accused persons which indicates that they were not concerned with the issuance of the cheques, or in case where legal lacuna of such nature is pointed out which goes to the root of the matter.”
The Court noted that the petitioner relied on Supreme Court judgments, including Dilip Hariramani v. Bank of Baroda and Himanshu v. B. Shivamurthy, which quashed proceedings against partners or directors where the firm or company had not been impleaded or served with statutory demand notices. Referring to the larger Bench judgement in Aneeta Hada v. Godfather Travels & Tours (P) Ltd., the Court recorded: “for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself.”
The Court elaborated on the principle, quoting: “commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words ‘as well as the company’ appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof.”
However, the Court also considered the scope for curing procedural infirmities. Referring to U.P. Pollution Control Board v. Modi Distillery, it recorded: “a complaint should not be dismissed at the threshold merely on account of a curable legal infirmity, and that the Court may allow appropriate correction to advance the cause of justice.”
Applying these principles, the Court observed: “Although it is the case of the respondent that the error of non-arraignment of the firm as an accused is not fatal to the proceedings and seeks an opportunity to amend the complaint instead of quashing the complaint, it is relevant to see whether the same is a curable infirmity or whether the amendment would prejudice the accused persons or change the nature of the complaint.”
The Court found that cognizance had been taken, but effective trial proceedings had not yet commenced. Summons had not been effectively served and no plea or evidence recording had occurred. In these circumstances, “it cannot be said that permitting an amendment to implead the partnership firm would cause prejudice to the petitioner. On the contrary, refusal to allow such an amendment would result in stifling of proceedings on a mere technicality, thereby defeating the object of Section 138 of the NI Act.”
The Court also noted that the complaint contained typographical errors, including the mistaken year in the legal notice, but recorded: “it is apparent that the date mentioned in the Legal Notice is only a typographical error.”
Justice Amit Mahajan directed that the petition stands dismissed with specific directions regarding the course of proceedings before the trial court. The Court stated: “In view of the above, the respondent/complainant is permitted to file an application seeking amendment of the complaint, by impleading necessary parties and to suitably amend the memo of parties in the complaint.”
It was further directed: “the learned Trial Court shall consider the application, if any, filed by the respondent / complainant keeping in view the observations made in the present judgment only if the same is filed within a period of two months from date, subject to payment of compensatory cost of ₹35,000/- by the complainant to the petitioner.”
The Court concluded that while the summoning order dated 05.03.2019 was non est, this deficiency alone did not justify quashing the complaint. It recorded: “The complaint, being otherwise maintainable, should not be quashed solely on this technical ground.”
Accordingly, the petition was dismissed, and pending applications disposed of.
Advocates Representing the Parties:
For the Petitioner: Mr. Gagan Gandhi, Mr. Vijay Kumar, Dr. B.S. Chauhan, Ms. Luvika, and Ms. Shraddha Saxena, Advocates.
For the Respondent: Mr. Nitin Sharma, Advocate, along with Mr. Jatin Kumar, Mr. Ashish Mohan, Senior Advocate, Amicus Curiae.
Case Title: Himanshu v. TCNS Clothing Co. Ltd.
Neutral Citation: 2025: DHC:7593
Case Number: W.P.(CRL) 1989/2022 & CRL.M.A. 17238/2022
Bench: Justice Amit Mahajan
