Cheque bounce case invalid if no notice to firm, partners: High Court

Bengaluru: The Karnataka high court recently ruled that in criminal proceedings in cheque bounce cases under Section 138 of the Negotiable Instruments Act against a firm and its partners will be invalid if proper notice is not issued to both of them.
Justice Suraj Govindaraj said that separate notices must be issued to the firm and its partners, or a single notice must be addressed to all of them, while dismissing two petitions filed by G K Akshata and KR Aruna Prasad, both from Bengaluru, against V Raghavendra, the managing partner of M/s Pioneer Developers.
The petitioners had agreed to purchase commercial space from Pioneer Developers in 2009, but the company failed to deliver possession and instead sold the properties to third parties. As a result, V Raghavendra issued four cheques to the petitioners to return their money, but they bounced, leading to the initiation of proceedings under the NI Act.
Initially, the magistrate court took cognizance of the case and rejected V Raghavendra's application for discharge. However, the 59th Additional City Civil and Sessions Judge later allowed his appeal and discharged him on the grounds that Pioneer Developers was not impleaded as an accused. The petitioners then challenged this order in the high court.
Justice Govindaraj, after examining the case, concluded that criminal proceedings under Section 138 of the NI Act would not be maintainable without issuing a notice to the partnership firm specifically. The judge referred to the explanation to Section 141 of the Act, which equates companies and firms, and applied the Supreme Court's decision in Aneeta Hada's case to partnership firms. The court held that issuing a notice to a single partner, even if he or she is the managing partner, would not constitute valid notice to the firm as required by the explanation to Section 141.
Furthermore, Justice Govindaraj suggested that the legislature should reconsider the explanation to Section 141 of the NI Act in relation to the Indian Partnership Act 1932 to ensure a harmonious interpretation of both statutes.
The judge noted that a partnership firm is not a body corporate and should not be treated the same as a company. He also requested the Law Commission of India to review Section 141 in light of the provisions of the Indian Partnership Act, 1932, before dismissing the petitions.