Isabella Mariam

The High Court of Allahabad at Lucknow, Single Bench of Justice Brij Raj Singh held that a partnership firm cannot be treated as distinct from its partners and therefore declined to quash cheque dishonour proceedings initiated against two individuals who claimed to be sleeping partners acting through an attorney. The Court noted that liability in a partnership is joint and several, and that the alleged issuance of cheques on behalf of the firm by an authorised representative did not insulate the partners from prosecution. Consequently, the Bench dismissed two connected petitions seeking to invoke inherent jurisdiction to terminate proceedings arising from complaints filed under Section 138 read with Section 141 of the Negotiable Instruments Act by the creditor firm.

The matter concerned two applications seeking quashing of proceedings arising out of criminal complaints filed under the Negotiable Instruments Act, 1881. The complaints alleged dishonour of cheques issued on behalf of a partnership firm engaged in the business of agricultural and allied products. The applicants had entered into a partnership deed for carrying on business under the name “M/s K.D. Overseas” and later executed a registered power of attorney in favour of Sahil Verma to manage business operations, including issuance of cheques and conducting financial transactions. The applicants described themselves as sleeping partners without involvement in day-to-day affairs.

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Opposite parties initiated two complaint cases under Section 138 read with Section 141 of the Act, arraying the firm and its managerial officer as accused nos.1 and 2, Sahil Verma as accused no.3, and the applicants as accused nos.4 and 5. It was asserted in the complaints that the cheques were issued and signed on behalf of the firm and that accused nos.1 to 5 were individually, jointly and severally responsible.

The applicants contended that they were not signatories to the cheques, had no knowledge of the transactions, and were not responsible for conduct of the firm’s business. They relied on Supreme Court judgments concerning companies and vicarious liability. The opposite parties argued that liability of partners in a partnership firm is joint and several, and cited the Supreme Court decision in Dhanasingh Prabhu v. Chandrasekar and another (2025 SCC OnLine SC 1419) to support maintainability of proceedings against partners.

Upon perusal of records and submissions, the High Court proceeded to adjudicate whether interference under Section 482 was warranted and whether the partners could be exempted from prosecution on the ground that cheques were issued by an authorised representative on behalf of the firm.

The Court recorded that the applicants executed a registered power of attorney authorising Sahil Verma to “take charge and exercise all necessary powers for the smooth conduct and management of the firm’s day-to-day affairs.” It noted that Sahil Verma issued the cheques pursuant to this authority and stated that “the applicants cannot escape from their liability because a partnership firm is not really a legal entity separate and distinct and it can have a legal persona only when it is considered along with its partners.” The Court further stated that “Sahil Verma has acted on the basis of Power of Attorney executed by the applicants and he has issued the cheque on behalf of the firm, therefore, the applicants are also liable can be prosecuted.”

The Court examined the decisions relied upon by the applicants and observed that “the aforesaid judgments of the Supreme Court are not applicable in view of the law laid down by the Supreme Court in paragraph 9.8 of the case of Dhanasingh Prabhu (supra).” It recorded that the distinction between corporate directors and partners of a firm is decisive, noting that “a partnership firm has no legal recognition in the absence of its partners.” It stated that the Supreme Court in Dhanasingh Prabhu had held that “if a partnership firm is liable for the offence under Section 138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally.”

The Court referred to Section 25 of the Indian Partnership Act, 1932 and stated that “every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.” Finally, the Court concluded that “the trial court has rightly entertained the complaint and issued summons against the applicants” and that “no interference is required by this Court in exercise of its extraordinary jurisdiction under Section 528 of Bharatiya Nagarik Suraksha Sanhita, 2023.”

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The Court recorded that “no interference is required by this Court in exercise of its extraordinary jurisdiction under Section 528 of Bharatiya Nagarik Suraksha Sanhita, 2023. The trial court has rightly entertained the complaint and issued summons against the applicants.” The Court concluded that “both the applications being devoid of merit, are rejected.”

Advocates Representing the Parties:

For the Petitioners: Sri Abhineet Jaiswal
For the Respondents: G.A., Abhinav Kumar Mathur, Avdhesh Kumar Pandey, Ram Kumar Verma

Case Title: Sonali Verma and Another vs State of U.P. Thru. Its Addl. Chief Secy. Deptt. of Home Lko. and 2 Others
Neutral Citation: 2025: AHC:74743
Case Number: Application U/S 482 No. 8942 of 2025 (along with Application U/S 482 No. 8902 of 2025)
Bench: Justice Brij Raj Singh