Shivappa Reddy vs S. Srinivasan

2025 INSC 729 NON-REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL No. 4363 OF 2024

SHIVAPPA REDDY … APPELLANT

VERSUS

S. SRINIVASAN … RESPONDENT

JUDGMENT

AUGUSTINE GEORGE MASIH, J.

1. Present Appeal is challenging the order dated 23.09.2023

passed by the Single Judge of the High Court of Karnataka

at Bengaluru, whereby the petition filed under Section 482

of the Code of Criminal Procedure, 1973 (hereinafter,

“CrPC”) challenging the proceedings arising out of a

complaint filed by the Appellant under Section 200 CrPC

for the offence punishable under Section 138 of the

Negotiable Instruments Act, 1881 (hereinafter, “NI Act”) has Signature Not Verified Digitally signed by

been allowed at the behest of Respondent-Accused No.4. DEEPAK SINGH Date: 2025.05.19 16:43:47 IST Reason:

Criminal Appeal No. 4363 of 2024 Page 1 of 11

2. In brief, the facts leading to the filing of the petition before

the High Court were that the Appellant had filed a

complaint against M/s AVS Constructions - a Partnership

Firm (Accused No.1), and its partners i.e., S. Yuvaraju

(Accused No.2), S. Sundaraiah (Accused No.3 and S.

Srinivasan (Accused No.4) for dishonouring of twelve

cheques of ₹50,00,000/- (Rupees Fifty Lakhs) each

aggregating ₹6,00,00,000/- (Six Crore) towards the refund

of sale consideration as issued by accused No.1 - M/s AVS

Constructions (hereinafter, “Partnership Firm”) being

signed by Accused No.2, the authorized signatory. The

cheques, upon presentation, stood dishonoured due to

‘stop payment’ instructions issued by the drawee.

3. After duly serving the Statutory notice upon the

Respondent and the other accused, when no amount was

received of the dishonoured cheques, a complaint under

Section 200 CrPC for an offence punishable under Section

138 of the NI Act was preferred. After recording the

preliminary evidence, summons was issued to the accused

Criminal Appeal No. 4363 of 2024 Page 2 of 11 on taking cognizance of the offence under Section 138 of

the NI Act.

4. At this stage, S. Srinivasan (Accused No.4) (Respondent

herein), preferred a petition under Section 482 CrPC before

the High Court, taking the plea that the proceedings

against the Respondent could not be continued as he had

ceased to be a partner of the Partnership Firm (Accused

No.1).

4A. It was asserted therein that in reply to the legal notice

which was served upon the Accused by the Appellant-

Complainant, Respondent-Accused No.4 brought to the

notice of the Appellant the fact that he had retired from

the Partnership Firm on 01.04.2015, and hence the

proceedings could not be sustained against him.

5. Upon notice being issued, the Appellant appeared and

filed his response wherein it was clearly stated that the

Statutory mandates as provided under Sections 32, 62 and

63 of the Indian Partnership Act 1932 (hereinafter,

“Partnership Act”) had not been complied with.

Criminal Appeal No. 4363 of 2024 Page 3 of 11 5A. The Appellant obtained a certified copy of Form-A on

27.08.2020, maintained by the Registrar of Firms, which

depicted that the Respondent is the partner of Partnership

Firm (Accused No.1). It was only after verifying the said

aspect that the legal notice was issued to the Respondent.

Allegations were also made that the Respondent, in an

attempt to escape his liability, had fabricated a backdated

retirement deed in connivance with the other accused and

got an entry made in the ledger of the Registrar of Firms

on 20.10.2020 that he had ceased to be a partner.

5B. It is asserted that this entry in the Register maintained by

the Registrar of Firms is subsequent to the date of

issuance of the cheques as also after the issuance of the

legal notice.

5C. Section 72 of the Partnership Act has also not been

complied with, which mandates and requires a retired

partner to publish a public notice in one of the vernacular

newspapers circulated in the district where the Firm is

located. No such document or publication had been

produced, nor any such public notice mentioned to have

Criminal Appeal No. 4363 of 2024 Page 4 of 11 been published in any newspaper in the reply filed to the

legal notice. The mandate of the Statute has not been

followed, and in the absence of public notice, the

Respondent cannot wriggle out of the liability as a partner

of the Firm.

5D. Another aspect which has been asserted is that after

cognizance was taken by the Court, an application under

Section 239 of the CrPC had been preferred by the

Respondent seeking discharge on the ground that he had

ceased to be a partner of the Partnership Firm (Accused

No.1). The Appellant had filed detailed objections to this

application.

5E. The Trial Court, after hearing both parties, dismissed the

application on merits vide order dated 01.09.2021. On

these grounds, the petition under Section 482, as

preferred by the Respondent, was opposed.

6. The learned Single Judge, on considering the submissions,

had allowed the petition. The Court observed that the

cheques had not been signed by the Respondent. Rather,

it is S. Yuvaraju (Accused No.2), who had issued the

Criminal Appeal No. 4363 of 2024 Page 5 of 11 cheques in his individual capacity and not as a partner of

the Partnership Firm (Accused No.1). It was held that

there was no legally enforceable debt against the

Respondent for which the cheques were issued. Further,

the High Court accepted the contention that it had been

established that the Respondent had ceased to be the

partner of the Firm on the date of issuance of the cheques,

and therefore could not be prosecuted for an offence under

Section 138 of the NI Act.

7. The Counsel for the Parties have argued their case on the

basis of the above pleadings and factual assertions.

8. On considering the submissions made by the Counsel for

the parties. It is apparent that the plea of the Respondent,

as has been accepted by the High Court vide impugned

order, regarding his claim of not being a partner of the

Partnership Firm (Accused No.1), in whose name and on

whose behalf the cheques have been issued, signed by S.

Yuvaraju (Accused No.2), an authorized signatory, does

not in any manner, foist liability upon the Respondent

Criminal Appeal No. 4363 of 2024 Page 6 of 11 herein needs to be tested on the anvil of the pleadings and

the Statutory requirements.

9. Since the Partnership Firm (Accused No.1) is a Firm

registered with the Registrars of Firms, the provisions of

the Partnership Act need to be referred to. A perusal of

Section 72 of the Partnership Act would show that notice

of retirement must be given to the Registrar of Firms under

Section 63 and by publication in the Official Gazette, and

in at least one vernacular newspaper circulated in the

district where the Firm to which it relates has its place or

principal place of business, such notice needs to be

published. This should relate to the retirement of a

partner, which includes admission, expulsion, or

resignation from the Firm in any manner that is including

or excluding a partner in a partnership Firm. Section 32 of

the Partnership Act deals with the retirement of a partner.

In addition, Section 62 of the Partnership Act deals with

the information to be submitted with regard to the change

in the names and addresses of the partners to the

Registrar of Firms. What, therefore, is mandated under the

Statute is that if any registered Firm intends to include or

Criminal Appeal No. 4363 of 2024 Page 7 of 11 exclude by way of resignation, expulsion or addition of any

partner in the Firm, an intimation to the said effect has to

be forwarded and conveyed to the Registrar of Firms. As

per Section 63, the Registrar shall make a record of the

notice in the entry relating to the Firm in the Register of

Firms and shall file a notice along with a statement

relating to the Firm as provided for under Section 59 of the

Partnership Act.

10. None of these requirements as provided and mandated for

under the Statute, have been adhered to by Respondent

No.1. Merely putting forth a resignation or the partners

entering into an agreement or drafting a deed or/and

accepting the resignation of a partner of the Firm is

insufficient for discharging the liability of a partner of the

Firm unless a proper entry to the said effect after the

publication has been given effect to with the same, having

been recorded in the Register of Firms in the office of the

Registrar of Firms as provided for in Section 63 of

Partnership Act.

Criminal Appeal No. 4363 of 2024 Page 8 of 11

11. Further, simply because the cheques were signed by S.

Yuvaraju (Accused No.2), who was the authorized

signatory of the Partnership Firm (Accused No.1), does not

discharge the liability of the Respondent. This is especially

so when in the complaint filed under Section 200 of the

CrPC by the Appellant, a categorical averment is made that

the Respondent along with the other two partners of the

Partnership Firm (Accused No.1) is involved in day-to-day

affairs of the said Firm. In the complaint, it has clearly

been pleaded that the Respondent-Accused No.4 was

present at the residence of Accused No.2 when the cheques

were signed. Further allegations are there to the effect that

Accused No.3 and Respondent Accused No.4 had stated

that they would ensure that the money is repaid. These

facts collectively demonstrate that the requirements under

Section 141 of the NI Act have been satisfied. Therefore,

the Respondent cannot escape from the liability

concerning the cheques which were issued by the

Respondent.

12. The findings, therefore, with regard to the Respondent

being no longer a partner of Partnership Firm (Accused No.

Criminal Appeal No. 4363 of 2024 Page 9 of 11

1) on the date of the issuance of the cheques is

unsustainable, as it is contrary to the mandate of the

Statute and prima facie the factual aspect.

13. All these aspects are mixed questions of fact and law

touching on the anvil of disputed questions calling for

proof by way of evidence, which cannot be gone into and

decided in a proceeding under Section 482 CrPC. Such

matters require the parties to lead evidence as per their

respective stands, and hence, calling for no interference by

the High Court. Without further going into the details of

the pleadings relatable to the facts, we are of the view that

the High Court has erred in law by exceeding its

jurisdiction while exercising its powers under Section 482

CrPC.

14. In view of the above, the present appeal is allowed. The

order dated 23.09.2023 passed by the High Court is

hereby set aside. Proceedings before ACMM, Bengaluru in

CC No.17788/2020 are restored. Trial Court is directed to

proceed in accordance with the law.

Criminal Appeal No. 4363 of 2024 Page 10 of 11

15. Any observations made in this order shall have no bearing

on the merits of the case in the trial, and the same, if any,

are restricted to the decision in the limited compass of the

jurisdictional sphere as exercised by the High Court.

16. Pending application(s), if any, stand disposed of.

……...……….……………………..J. [ ABHAY S. OKA ]

……..………..……………………..J. [ AUGUSTINE GEORGE MASIH ]

NEW DELHI;

MAY 19, 2025

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