Order 22

Order Details: COPY OF ORDER
Pdf Text: CC NI ACT / 24783/2024
Management And Entrepreneurship And Professional Skills Council Vs. Av
Industries And Others
11.12.2025
Order
1. Vide this order, I shall decide upon application moved by the proposed accused no.3
for dropping of proceedings against him.
2. Ld. Counsel for the complainant submitted that cognizance is to be taken against
proposed accused no.3 Mr. KM Seth, who is in charge of the day-to-day affairs of the
partnership firm. The emails appended in the complaint showcase that he was in fact
working in the day-to-day affairs of the firm. Even though he is not a partner in the
firm, vicarious liability is appended upon him under Section 141 of the NI Act.
2.1 He further stated, that a legal demand notice sent to the partner is notice to
the partnership firm as well, drawing from the principle of a company being liable
under Section 138 of the NI Act. The Ld. Counsel placed reliance upon the
judgment of the Hon’ble SC in S.P. Mani and Mohan Dairy v. Dr. Snehalatha
Elangovan1 to elaborate upon his submissions.
3. Ld. Counsel for the proposed accused has submitted that, the proposed accused no.3
is neither a signatory of the cheque in question nor a partner in the partnership firm.
Furthermore, the legal demand notice has only been sent to one of the partners i.e.
proposed accused no.1 only and not to proposed accused no.3 Mr. KM Seth.
4. Arguments heard. Record perused.
5. Under Proviso to Section 223(1) BNSS, an accused is to be given an opportunity prior
to taking cognizance as to why cognizance should not be taken against him. If a prima
facie defence is made out by the proposed accused without going into its merits
{which are subject to trial}, it is within the domain of the court to deny taking
cognizance.
1 MANU/SC/1189/2022
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6. Upon a cumulative reading of the Indian Partnership Act, it can be deduced that
partners of a partnership firm are ‘jointly and severally liable’ for the acts of the firm.
The partnership firm has no independent juristic existence of its own, like that of a
company. Neither are the partners ‘vicariously liable’ for the acts of the firm. The firm
is nothing but a compendious name forming all the partners constituting the firm.
7. Reference may be had to Section 141(2) of the NI Act whereby vicarious liability is
appended to the directors of a company by way of deeming fiction. The Explanation
to Section 141 of the NI Act also includes a ‘firm’ within its domain.
8. The Hon’ble SC in its judgment of Dhanasingh Prabhu v. Chandrasekar and another2
has clarified that even though the partnership firm is included as an expansive
category under the Explanation to Section 141 of the NI Act, jurisprudentially
speaking, it is not the same as a company. The directors of a company are vicariously
liable for the acts of a company. However, the partners of a partnership firm stricto
sensu are ‘jointly and severally’ liable for their acts. A partnership firm is not separate
in law from its partners.
9. Since, the partnership firm is not at par with a company, it cannot be said that a person
in charge of the affairs of a partnership firm will be liable under the Act. The ‘joint and
several’ liability will extend only to the partners of a firm.
10. The case of S.P. Mani and Mohan Dairy3 is distinguishable on facts. In the case cited
by the Ld. counsel for the complainant, the court was in seisin of the role of a “silent
partner” in the day to day affairs of the firm. In the instant case, it is an established fact
that Mr. KM Seth is not a partner in the firm. The GST records, KYC documents and
copy of the partnership deed{duly stamped and produced by the Bank official} of the
proposed accused firm categorically lay out the details of the partners in the firm.
11. In the instant case, Mr. KM Seth is an accountant in the firm, however he is not a
partner thereof.
2 2025 INSC 831
3
Supra 1
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12. Accordingly, this court does not deem it fit to take cognizance against proposed
accused no.3.
(Anjali Singh)
JMFC (NI Act) – 03/PHC/ND/11.12.2025
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