Even An Unregistered Partnership Firm Can Maintain ‘Cheque Bounce’ Complaint: Himachal Pradesh HC [Read Judgment]

“It would be noticed that save and except an isolated authority of the Division Bench of Andhra Pradesh High Court in Amit Desai’s case (supra), all other High Courts in the country, have categorically held that the proceedings under Section 138 of the N.I. Act, are not recovery proceedings.”

The Himachal Pradesh High Court has held that even an unregistered partnership firm can maintain a ‘Cheque bounce” complaint under Section 138 of the Negotiable Instruments Act.

Justice Tarlok Singh Chauhan, in M/s Uttam Traders Ranghri vs. Tule Ram alias Tula Ram, took note of the views adopted by various high courts and observed that the law is not consistent as different views have been expressed.

The Kerala High Court had, in a 1975 judgment Kerala Arecanut Stores v. M/s. Ramkishore and Sons, held that such a complaint would be maintainable. But Andhra Pradesh High Court, in Amit Desai and another vs. M/s Shine Enterprises, disagreed with this view and held that there is a bar of filing a suit by unregistered firm, the bar equally applies to criminal case as laid down in explanation (2) of Section 138 of the Negotiable Instruments Act.

A single bench of Allahabad High Court, in Gurcharan Singh vs. State of UP, had observed that the bar created under Section 69 of the Partnership Act had no application and the proceedings under Section 138 of the Act were still maintainable. In Capital Leasing and Finance Co. vs. Navrattan Jain, the single bench of Punjab and Haryana High Court agreed with the Kerala High Court view.

The judgment also takes note of judgments of Karnataka, Madras, Delhi and Gauhati high courts which have also held that the complaint would be maintainable.

The observation by the Supreme Court in R. Vijayan vs. Baby has also been noted by the court. “It is sometimes said that cases arising under section 138 of the Act are really civil cases masquerading as criminal cases. The avowed object of Chapter XVII of the Act is to "encourage the culture of use of cheques and enhance the credibility of the instrument". In effect, its object appears to be both punitive as also compensatory and restitutive, in regard to cheque dishonour cases. Chapter XVII of the Act is a unique exercise which blurs the dividing line between civil and criminal jurisdictions. It provides a single forum and single proceeding, for enforcement of criminal liability (for dishonouring the cheque) and for enforcement of the civil liability (for realization of the cheque amount) thereby obviating the need for the creditor to move two different fora for relief.”

Justice Chauhan finally observed: “It would be noticed that save and except an isolated authority of the Division Bench of Andhra Pradesh High Court in Amit Desai’s case (supra), all other High Courts in the country, have categorically held that the proceedings under Section 138 of the N.I. Act, are not recovery proceedings. Therefore, even an unregistered Partnership firm can maintain a complaint under Section 138 of the Act.”