Unregistered Partnership Firm can maintain a complaint u/s. 138 of the Negotiable Instruments Act, 1881

Harshit Sharma | Amity Law School, Madhya Pradesh | 14th February 2020

Narendra V/s. Balbir SinghCRIMINAL APPLICATION (APPA) NO. 748 OF 2018

FACTS OF THE CASE

1. The Bench in the present case was constituted to answer the question referred by the Single Bench of this Court vide order dated 24/10/2018, whereby the learned referral Judge expressed a diagonally opposite view as that of taken by the Single Bench of this Court itself in the case of Sai Accumulator Industries, Sangamner Vs. Sethi Brothers, Aurangabad, wherein he took a view took a view that the complaint filed by an unregistered firm under Section 138 of the Negotiable Instrument Act, 1888 (in short “N.I. Act”) is not tenable in law in view of the bar under Section- 69(2) of the Indian Partnership Act, 1932 (in short “the Act of 1932”) and referred the question for consideration of the larger Bench.
2. In the backdrop, the Applicant, an unregistered rm, had initiated proceedings under Section 138 for dishonour of cheque. The Respondent contested the proceedings, stating that the applicant did not have locus to initiate such proceedings, in view of the bar under Section 69(2).

ISSUES RAISED

1. Whether prosecution of accused under Section 138 of the Negotiable Instruments Act, 1888, is hit by the bar created by sub-section (2) of Section 69 of the Indian Partnership Act, 1932? 

RULING OF THE COURT/ THE COURT HELD THAT

While appreciating the efforts of Learned counsels who ably assisted the court in reaching to the answer to the referred question, while observing the following:

1. “The court held that the term ‘suit’ under Section 69(2) must receive its ‘plain and simple meaning’ and should not be stretched for securing immunity from criminal prosecutions, which is reproduced below with the except from the judgment, “There is no point in stretching the bar which is in the nature of temporary bar to the suit to the complaints under section 138 of the N. I. Act, which is in the nature of penal provision with the object to inculcate faith in banking transactions.”
2. In this regard, reliance was placed on a coordinate bench decision of the Andhra Pradesh High Court in AV Ramanaiah v. M. Shekhara, ALD(CRI) 2009 2 801, which fortified its view by observing that, “The bar contained under Section 69 of the Act of 1932 is intended to prevent an unregistered partnership rm to enforce a right arising out of a contract against a third party, and that it is not intended to create any such bar for the purposes of enforcing rights arising out of statutes or for invoking the protection available under any other statute.”
3. Accordingly, the Hon’ble High Court answered the reference as under, “The prosecution of an accused under Section 138 of the Negotiable Instruments Act, 1888, is not hit by the bar created by sub-section (2) of Section 69 of the Indian Partnership Act, 1932.” It added, “the ‘debt or other liability’ as has been referred in Section 138 of the N.I. Act, is a ‘legally enforceable debt or other liability’. However, by creating a bar to enforce a right arising out of contract by an unregistered rm, with the object to promote registration of the firms and to exempt the small firms from compulsory registration, the inherent character of enforceability of the ‘right’ does not get changed and it would still remain as a right enforceable by law.”