Bombay High Court Rules Partners Liable in Cheque Bounce Case Despite Joining After Issuance of Cheque

In the High Court of Judicature at Bombay, Criminal Appellate Jurisdiction, Writ Petition No. 688 of 2023 was filed by Rajesh Babulal Shah and Anr., the petitioners, against Chandresh Chimanlal Shah and Anr., the respondents. The petitioners were represented by Dr. Samarth S. Karmarkar from Karmarkar and Associates, while Ms. M.R. Tidke, APP, appeared for the State.

The challenge in the petition was against the order dated 6th January 2020, passed by Metropolitan Magistrate 14th Court at Girgaon Mumbai, in a complaint under Section 138 of the Negotiable Instruments Act, 1881. The petitioners contended that they became partners of the accused No.1 firm with effect from 31st January 2019, and the cheque in question was dishonoured earlier but was presented for encashment on 7th March 2019 with an intention to initiate prosecution against them. They argued that they were not partners at the time of the transaction and the issuance of the cheque, and thus, liability under Section 141 of the Negotiable Instruments Act, 1881 did not apply to them.

However, the court referred to the judgment of the Apex Court in the case of S.P. Mani and Mohan Dairy vs. Dr. Snehalatha Elangovan, reported in 2022 SCC OnLine SC 1238, which established that the person who is in-charge and responsible for the conduct of affairs of a firm/company is liable to be proceeded with and punishable under Section 138 of the Negotiable Instruments Act, 1881. The court noted that every person who is in-charge and responsible for the affairs of the firm on the date of the cheque, date of dishonour, date of receipt of notice, and on the 15th day of the date of receipt of notice are liable to be proceeded under Section 141 of the Negotiable Instruments Act, 1881. In this case, the petitioners became partners on 31st January 2019, and the events of presentation of the cheque, dishonour notice, and expiry of 15th day after receipt of notice occurred after they became partners. Therefore, prima facie, the court found that the petitioners were liable to be proceeded under Section 141 of the Negotiable Instruments Act, 1881.

Consequently, the court dismissed the writ petition as withdrawn, with no costs. The order of issuance of the dishonour of the cheque was held to be suffering from illegality.

Rajesh Babulal Shah and Anr V/s. Chandresh Chimanlal Shah and Anr