A partner cannot maintain a case under Section 138 of NI Act for his share till the accounts of a Partnership Firm are not finalized: Madras HC
By : Legal Era
Update: 2019-11-01 11:41 GMT
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The Madurai Bench of the Madras High Court ruled that in case of Partnership Firm, where the accounts are not finalized and the amount payable to each of the partner is yet to be determined, debt or liability shall not arise.The respondent who was a partner in a Partnership Firm was unhappy with the manner in which the Partnership Firm was run and therefore, opted to move out of the firm...
The Madurai Bench of the Madras High Court ruled that in case of Partnership Firm, where the accounts are not finalized and the amount payable to each of the partner is yet to be determined, debt or liability shall not arise.
The respondent who was a partner in a Partnership Firm was unhappy with the manner in which the Partnership Firm was run and therefore, opted to move out of the firm and sought the contribution/share given by him. The cheque issued in his favour was dishonored. He therefore filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the petitioners and also the Partnership Firm on the ground that, the cheque that was issued in his favour towards his contribution to the Partnership Firm was dishonored.
The High Court of Madras held that in this case, there was a partnership deed and the respondent had also contributed his share in the Firm. The partnership deed itself provided that, the profit and loss of the Partnership Firm shall be shared in a particular ratio.
Further the Court ruled that it is also relevant to take note of Section 13 of the Partnership Act, 1932 which deals with the mutual rights and liabilities between the partners. The nature of the liabilities in between the firm and the partner is joint and several. The Court maintained that the respondent is not entitled to maintain the complaint under Section 138 of the Negotiable Instruments Act,1881 against the Firm and its partners, since there was no determined debt / liability on the date of the alleged drawal of cheque in his favour. Even on the date when the cheque was said to have been issued by the respondent, he continued to be a partner in the Firm.
The Court concluded that the private complaint filed by the respondent is an abuse of process of Court and the same cannot be sustained in the eye of law.
Justice N. Anand Venkatesh presided over the case.