The High Court of Madhya Pradesh, Indore Bench, has dismissed a petition seeking the quashing of criminal proceedings under Section 138 of the Negotiable Instruments (N.I.) Act against a partner who did not sign the cheques in question. The Court held that since the petitioner was a partner on the date the underlying liability was accepted, she remains jointly and severally liable with the firm for the dishonoured instruments.
Justice Sanjeev S. Kalgaonkar, presiding over the matter, observed that the legal status of a partnership firm differs from that of a company under the N.I. Act, emphasising that the liability of partners is personal and direct rather than purely vicarious.
Background of the Case
The dispute arose from a private complaint filed by Manish Tiwari (the complainant) against Pawan Singh and the petitioner, Rachna Singh, both partners in a firm named M/s Vani Education. According to the complaint, a retirement deed was executed on 15 November 2015, settling a liability of ₹33,20,000/- in favour of the complainant upon his retirement from the firm.
To satisfy this debt, Pawan Singh issued six cheques on behalf of the firm. Two of these cheques, dated 20 August 2016, for ₹5,55,335/- each, were returned unpaid with remarks including “payment stopped by drawer” and “date alternative sig. required of owners.” After the accused failed to make payment following a statutory notice, a complaint was filed under Section 138 of the N.I. Act and Section 420 of the IPC.
The Judicial Magistrate First Class (JMFC), Indore, rejected the petitioner’s application for discharge on 28 March 2019, leading to the present petition under Section 482 of the Code of Criminal Procedure (Cr.P.C.).
Arguments of the Parties
The petitioner contended that she had retired from the firm on 22 February 2016, through an admission-cum-retirement deed and was not responsible for the firm’s management when the cheques were issued. Her counsel argued that she did not sign the cheques and that the complaint was not maintainable because the partnership firm itself was not arraigned as an accused, citing the Supreme Court rulings in Pawan Kumar Goel Vs. State of U.P. and Bijoy Kumar Moni Vs. Paresh Manna.
The respondent/complainant countered that the petitioner was a partner when the ₹33.20 lakh liability was admitted in the 2015 deed. They argued that subsequent retirement does not discharge a partner from existing liabilities. Furthermore, they maintained that the legal procedure for notifying retirement under the Indian Partnership Act was not followed and that the partnership firm lacks a legal identity distinct from its partners.
Court’s Analysis and Observations
The Court first addressed the petitioner’s claim of retirement, noting that a copy of a retirement deed is not “unimpeachable evidence” that can be used to quash a summoning order. Justice Kalgaonkar stated:
“The copy of retirement deed cannot be treated as unimpeachable, uncontroverted and clinching evidence, sufficient to hold at this juncture that petitioner Rachna Singh had retired before issuance of cheque in question and she was not liable to the partnership firm. The determination would depend on the evidence regarding whether any retirement deed was properly executed and whether the retiring partner (petitioner) complied with the provisions of Section 32(2) and 72 of the Indian Partnership Act.”
Regarding the liability of partners under Section 141 of the N.I. Act, the Court relied on the Supreme Court’s decision in Dhanasingh Prabhu Vs. Chandrasekhar (2025). The Court highlighted that while a director’s liability for a company is vicarious, a partner’s liability for a firm is joint and several:
“In the case of a partnership firm… there is no concept of vicarious liability of the partners as such. The liability is joint and several because a partnership firm is the business of partners and one cannot proceed against only the firm without the partners being made liable.”
The Court further clarified that unlike companies, where the corporate entity must be arraigned as an accused, a partnership firm is merely a “compendious name for the partners.” Therefore, proceeding against the partners directly is sufficient.
Decision
The High Court found that the petitioner was a partner when the debt was accepted in November 2015. The subsequent issuance of cheques from the firm’s account to discharge that debt directly involved her liability.
The Court concluded:
“The petitioner, being a partner on the date of acceptance of liability towards the retiring partner (the complainant) would be jointly and severally liable with the firm… The factum and effect of subsequent retirement of petitioner from the partnership firm would be considered after evidence in the trial.”
Finding no legal infirmity in the Magistrate’s refusal to discharge the petitioner, the High Court dismissed the petition.
Case Details:
- Case Title: Mrs. Rachna Singh vs. Manish and Others
- Case No.: MISC. CRIMINAL CASE No. 24557 of 2019
- Bench: Justice Sanjeev S. Kalgaonkar
- Date: 2 April 2026
