Section 138 NI Act: A partner cannot maintain a case if cheque is issued by the firm or other partners for his share whereas firm has not been dissolved yet [Read the Order]

Justice Venkatesh in the csae titled as Sudharsan vs S.Rajasoundaram on 17.10.2019 has held that a partner cannot claim any liability on other partner before the dissolution and therefore, cheque even if issued cannot be the basis of initiating a criminal case between the partners.

In a cheque bounce case, the Madras High Court observed and held as under:

"Admittedly in this case, there is a partnership deed entered into between the two parties and the respondent has also contributed his share in the Firm. The partnership deed itself provides that, the profit and loss of the Partnership Firm shall be shared in a particular ratio.

The respondent was not happy in the way in which the Partnership Firm was run and therefore, he wanted to get out of the firm by receiving back the contribution / share given by him. The cheque is said to have issued by the Firm and the other partners only towards his contributions/ share.....

If the respondent was not happy in the manner in which the business was run by the other partners, he should have worked out his remedy by seeking for dissolution of Firm or for rendition of accounts and for the settlement of his share / contribution which he invested at the time of entering the Partnership Firm .

Till the share of the respondent is determined in relation to the profits and losses incurred by the Firm, there is no question of the respondent claiming for the entire contribution made by him at the time of entering into the Partnership Firm.

It is therefore clear that, as on the day the alleged cheque is said to have been executed in favour of the respondent, there was no existing debt/ liability and the amount has not been determined as on that date. Previously, even on the date when the cheque is said to have been issued by the respondent, he continued to be a partner in the Firm.

In the considered view of this Court, the respondent is not entitled to maintain the complaint under Section 138 of the Negotiable Instruments Act against the Firm and its partners, since there was no determined debt / liability on the date of the alleged drawal of cheque in his favour.

Therefore, the private complaint filed by the respondent is an abuse of process of Court and the same cannot be sustained in the eye of law".

Read the Order here:

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