Jus Corpus Law Journal
Open Access Law Journal – Copyright © 2023 – ISSN 2582-7820
Editor-in-Chief – Prof. (Dr.) Rhishikesh Dave; Publisher – Ayush Pandey
This is an Open Access article distributed under the terms of the Creative Commons Attribution-
Non-Commercial-Share Alike 4.0 International (CC-BY-NC-SA 4.0) License, which permits
unrestricted non-commercial use, distribution, and reproduction in any medium provided the
original work is properly cited.
Case Comment: Rangabashyam v Ramesh: A Dilemma of an
Unregistered Firm
Devayani Shuklaa Shreya Sharmab
a
Symbiosis Law School, Hyderabad, India bSymbiosis Law School, Hyderabad, India
Received 21 April 2023; Accepted 13 May 2023; Published 17 May 2023
__________________________________
INTRODUCTION
When a cheque gets dishonored due to insufficient funds, the provision mentioned in Section
1381 deals with the issue. The section notes that if the Cheque issued by a person gets dishonored
due to insufficient funds or due to non-acceptance by the bank, the person withdrawing the
money or encasing the Cheque is entitled to file a suit against the payor, and the payor is liable
for imprisonment or paying double the price mentioned in the Cheque or both. Looking at the
present facts, we will find that a cheque was issued in favor of Defendant, and the Cheque was
dishonored, which compelled Defendant to file a case against the present case petitioner.
The case is widely discussed in Section 1412, which deals with offenses by a company. The
section mentions that if a cheque is issued on behalf of a company, then the person responsible
for the Company, i.e., the Director or the board of members of the Company, shall be liable for
the offense under Section 138 act3. This statute is used in the present case4 because it applies to
1 Negotiable Instruments Act 1881, s 138
2 Negotiable Instruments Act 1881, s 141
3 Negotiable Instruments Act 1881, s 138
4
Rangabashyam v Ramesh (2019) HC (6) CTC 392
129
SHUKLA & SHARMA: RANGABASHYAM V RAMESH: A DILEMMA OF AN UNREGISTERED FIRM
partnership firms. In the present case, the Cheque is issued on behalf of the Firm, and the
question arises if the partners of the Firm are to be held liable for the same or not. One of the
significant contentions both parties rely on is the registration of the Firm, which is discussed in
Section 69(2)5. The section states that no suit can be filed by or filed against an unregistered firm.
The present case is an exception to the said rule, and the researcher will highlight the contention
put forth by the petitioner expressing why the case is an exception.
The facts of the case and the arguments of both parties are captivating and urge the reader to
interpret the law regarding the situation. The case amalgamates two laws: the Negotiable
Instruments Act and The Partnership Act. Here, the Judges had a choice of harmoniously
interpreting two closely related sections, but they decided against it and gave their Judgment.
As the paper progresses, the researcher has brought forward their assertion. The case is an
appeal filed by the petitioners to quash the criminal case against them, arguing that it is not in
the purview of the law. The researcher has mentioned the arguments to understand the case
better and precisely acknowledge what the judges had heard and put forth their decision the
way they did.
FACTS
The Respondent, a partner in a firm known as Laxmi Agencies, was forced to take leave. Some
sums owed to the Respondent had to be paid to satisfy the obligation, so a cheque was issued
on behalf of the Firm of Rupees three lakhs. The Cheque, as mentioned above, was dishonored
due to insufficient funds, and a statutory notice was also given. After issuing the notice, the
Respondent brought a criminal action against the petitioners. The petitioners, listed as
defendants in this complaint, filed this motion to release the parties and halt the case because
the disputed Cheque was solely written in the Respondent's favor. The partners of the firm
issued the Cheque in place of the firm. It was argued that the case could only be continued by
giving the partnering Firm the required notice and mentioning it in the complaint.
5 Partnership Act 1932, s 69(2)
130
JUS CORPUS LAW JOURNAL, VOL. 3, ISSUE 3, MARCH – MAY 2023
CONTENTIONS BY BOTH PARTIES
Petitioners: The claim should be rejected since the Respondents did not add the Firm as a party
to the litigation, even though by virtue of the Cheque's issuance on behalf of the Firm, the Firm
must be included by law. It was further argued that the rules outlined in Section 1416, which
deals with corporations, also apply to partnership firms. The Firm's registration—or lack
thereof—was argued to be significant under Section 1417. It was contended that Sections 69(2)8
and 1419 cannot be coherently understood10.
Respondent: Only partnership firms that comply with the legal enterprise criteria are subject to
Section 14111. They argued that the Firm could not be considered a legal body because it was not
registered. According to the attorney, only the current Firm's partners have been named as
defendants in the action because the present Firm is not registered. Therefore, stating the Firm
is unnecessary because it is unlawful.
ISSUES
1. Can a case be filed against an unregistered firm according to Section 14112?
2. Can a partnership firm also be included along with the partners in a complaint of a
criminal offense by Section 13813?
JUDGMENT
The Hon'ble Court analyzed both sides arguments in great detail. The Court promptly
addressed the legal issue brought up in this case. The Court was in complete agreement with
the judgments made in the cases of Abdul Gafoor v Abdurahiman14 and Haldiram Bhujiawala
6 Negotiable Instruments Act 1881, s 141
7 Ibid
8 Partnership Act 1932, s 69(2)
9 Negotiable Instruments Act 1881, s 141
10 Akshita Saxena, ‘Dishonour of Cheque: Complaint against Partnership Firm Not Maintainable without Making
the Firm an Accused: Madras HC’ (Live Law, 27 July 2019) <[Link]
of-cheque-complaint-against-partnership-firm-not-maintainable--146720> accessed 13 May 2023
11 Negotiable Instruments Act, (1881) s 141
12 Ibid
13 Negotiable Instruments Act 1881, s 138
14 Abdul Gafoor v Abdurahiman (1999) 4 SCC 98 (Ker)
131
SHUKLA & SHARMA: RANGABASHYAM V RAMESH: A DILEMMA OF AN UNREGISTERED FIRM
& Anr v Anand Kumar Deepak Kumar & Anr.15 The judge determined that Sections 138 and
Section 69(2) cannot be interpreted coherently. The court determined that the bar under Section
69(2) would not apply in this case because the action under Section 138 is not one to enforce a
claim arising out of a contract. The term ‘Suit’ does not include criminal procedures in Section
69(2). A criminal investigation is never initiated to demand payment or put up security, by
definition. Depending on the weight of the guilt-indicating evidence, a conviction and
punishment are imposed for violating Section 138.
According to Section 141, the directors, board members, or partners deemed to be in charge of
the Firm or Company and responsible for the Firm's daily operations will be held accountable
for any crimes committed by the Company or a partnership firm. While discussing the
provision, the Court transcribed that for the Company's directors to be held liable, the Company
must be mentioned in the suit. The same law applies to firms as well. The Court believed that
the registration of the Firm was immaterial to be considered following Section 141. The Court
disagreed with the contentions made by the Respondent that since the Firm does not qualify to
be a legal entity, the suit was filed against the partners. The Court held that the Cheque was
issued in favor of the Respondent by the Firm, and after the Cheque was dishonored, no
statutory notice was issued to the Firm, and the Firm was also not made a party to the case. Only
the partners were mentioned in the suit. This is not following Section 141. Therefore, the Court
ruled in favor of the petitioners and dismissed the criminal case filed against them while
exercising its jurisdiction.
OBSERVATION
The researchers needed to agree with the Judgment given in the current case completely. The
Judgment that the registration of the Firm has no regard while deciding the issue, the researchers
are of a different opinion that the registration of the Firm has a significant standing in the case.
The researcher presents the case of Delhi Development Authority v Kochhar Construction16
work where the Judge quashed the case because the Firm in question was an unregistered Firm
15 Haldiram Bhujiawala & Anr v Anand Kumar & Anr (2011) SCC Del 3334
16 Delhi Development Authority v Kochhar Construction Work (1998) 8 SCC 559
132
JUS CORPUS LAW JOURNAL, VOL. 3, ISSUE 3, MARCH – MAY 2023
on the day the criminal proceedings were filed. Respondent 1, an unlisted company, initiated
legal action before the Delhi High Court, as was previously reported. In a countersuit, the Delhi
Development Authority challenged the proceedings on several grounds, including the statute
of limitations and Section 69(2). The Respondent filed a first appeal at the High Court in
opposition to the countersuit. It was later dismissed because the subsequent registration of the
Firm rectified the original flaw. After all, it was done so within the limitation period. The Court,
however, overruled the High Court's judgment and found that the procedures were intrinsically
flawed because they were illegitimate in the first place.
Therefore, the researcher believes that the Judge in the present case should have considered the
abovementioned case, and Issue - A could have ruled in favor of the Respondent. Section 69(2)
of the Partnership Act also talks about the consequence of an unregistered firm, and the Judge
of the present case should have taken into account the broader aspect of the law as well.
CASE ANALYSIS
The researcher of the paper proceeds to analyze the issues mentioned in the case and has come
up with an issue of their own. The researcher takes up the issue and presents case laws for a
better understanding of the issue.
I. Can a case be filed against an unregistered firm according to Section 141?
Given that the action under Section 138 is not one to enforce a claim arising out of a contract, the
bar under Section 69(2) will not apply in this case.17 Criminal procedures are not included in the
definition of ‘Suit’ as used in Section 69(2). A criminal investigation is never launched to impose
security or collect money. Based on the weight of the evidence of guilt, a conviction and
punishment are imposed for violating Section 138.
The Court has relied upon the Kerala High Court decision in Abdul Gafoor v Abdurahiman18
The repercussions of failing to register a partnership under Section 69(2) only apply to instances
17 ‘Section 69(2) Partnership Act Does Not Bar Suit Filed by an Unregistered Firm If Contract in Question Was Not
in the Course of Its Business Dealings: Supreme Court’ (Live Law, 31 January 2022)
<[Link]
190777> accessed 20 April 2023
18 Abdul Gafoor v Abdurahiman (1999) 4 SCC 98 (Ker)
133
SHUKLA & SHARMA: RANGABASHYAM V RAMESH: A DILEMMA OF AN UNREGISTERED FIRM
involving civil rights, and an unregistered partnership business may file a complaint under
Section 138.
The Court relied on a similar case: Kerala Arecanut Stores v Ramkishore and Sons & Anr.19 In
the case above, The conflict between Kerala Arecanut Stores and Ramkishore and Sons involved
the second Defendant endorsing cheques in the plaintiff's favor even though the commodities
were not supplied. The plaintiff claimed payment for the Cheque plus interest and any discounts
the bank had received from the Company. In the end, the petitioner agreed to resolve the issue
by repaying. The suit was opined to be barred by Section 69 (2). The case has come up in several
different court processes, including one where it was decided that, in certain situations, an
unregistered partnership firm might indict a complaint. It has also come up in other legal
dispute-related issues. The court decided in the plaintiff's favor, stating that the complaint was
legitimately filed.
In the case of N. Elangovan v C. Ganesan,20 The Magistrate, Saidapet, Chennai, while passing
the impugned Judgment, had inter-alia observed 'that the Appellant in his written complaint,
argument, evidence, and notice had stated that the Respondent issued a Cheque in his favor
based on private money transaction since it transpires that Cheque was issued in favor of
Partnership Firm of ‘Sri Karpaga Vinayagar Jewellery’ and also that the Appellant in para 3 of
his complaint had admitted that the Respondent was the partner in the ‘Sri Karpaga Vinayagar
Jewellery’ Partnership Firm and in that case, other partners were not shown as Accused and also
that in the case as mentioned earlier, the Appellant. Since the Appellant had only filed the
present case against the Respondent and had not named ‘Sri Karpaga Vinayagar Jewellery’ as
the first accused, although ‘Sri Karpaga Vinayagar Jewellery’ was not currently in existence,
there was no pleading in the complaint by the Appellant regarding this. As a result, the case
filed by the Appellant is not maintainable and consequently gave the Respondent the benefit of
the doubt, finding him not guilty and acquitting him following Section 255(1) of the Criminal
Procedure Code.
19 Kerala Arecanut Stores v Ramkishore and Sons & Anr (1975) Ker 144
20 [Link] v C Ganesan (2014) (4) MLJ 517 (Crl)
134
JUS CORPUS LAW JOURNAL, VOL. 3, ISSUE 3, MARCH – MAY 2023
II. Can a partnership firm also be included along with the partners in a complaint of a
criminal offense by Section 138 of the Negotiable Instrument Act?21
Section 141 deals with offenses committed by corporations. Everyone in charge of and
responsible to the Company at the time the offense was committed and the Company itself shall
be regarded guilty of the offense and shall be subject to prosecution and punishment following
the law, it is said. This provision is applicable only if a company committed the offense. The
same applies to Partnership firms as well. While analyzing the provision, the Court has
categorically stated that the complaint cannot be issued against the Company's directors without
charging the Company. This idea has been made applicable to Partnership Firms as well.
Therefore, the registration or non-registration of the Partnership has no significant impact on
Section 141.
The Court relied on Purushottam v Shivraj Fine Art Litho Works22 The bar in Section 69(2) will
not apply if the unregistered firm is a party to the agreement and was not made in connection
with what the firm did with a third party. In this case, the respondent firm and Purushottam,
the preceding owner of the Company, entered into a contract. The partnership company was
then established. The owner Purushottam, who operated his own Company under the name
and alias "Dinesh Paper Mart," was owed the money stated in the lawsuit. When he entered into
a partnership with others, contributing to the funds, he brought all the assets and liabilities of
his former proprietary business into the arrangement. As a result, even though the unregistered
partnership firm gained the ability to enforce the contract that the defendant firm owed
Purushottam, it did not enter into the agreement with a third party or as part of its business
dealings with the defendants. If Section 69(2) is appropriately implemented, the Plaintiff-
appellants' lawsuit cannot be dismissed.
One similar case is Aneeta Hada v Godfather Travels and Tours Private Limited.23 The brief
facts of the case are as follows: The Appellant's cheque made payable to the Respondent was
21 Thakur PR, ‘DISHONOUR OF A CHEQUE—A DEEMED OFFENCE UNDER SECTION 138 OF THE
NEGOTIABLE INSTRUMENTS ACT 1881 (AS AMENDED IN 1988)’ (1991) 33(3) Journal Of Indian Law Institute
<[Link] accessed 20 April 2023
22 Purushottam v Shivraj Fine Art Litho Works (2007) (4) JT 564
23 Aneeta Hada v Godfather Travels and Tours Private Limited (2012) 5 SCC 661
135
SHUKLA & SHARMA: RANGABASHYAM V RAMESH: A DILEMMA OF AN UNREGISTERED FIRM
returned unpaid. The Respondent started criminal proceedings by submitting a complaint
following Section 138. The Company was not named as an accuser in the complaint filing.
However, the magistrate acknowledged the alleged Appellant's offense. The appellant
requested permission from the Hon'ble High Court to discontinue the criminal inquiry because
of the previous judgment. The case was brought before the Hon'ble Supreme Court due to
disagreements between the two judges that made up the two-judge bench. It was decided that
the officers of the drawer company are likewise liable in criminal court for the dishonor of the
check when the circumstances mentioned in Section 141 are satisfied. As a result, Section 141
charges must be brought against the corporation.
One of the landmark cases with similar facts is Haldiram Bhujiawala & Anr v Anand Kumar &
Anr24 for Section 69(2) to be applicable, the disputed contract had to be one that the Plaintiff
Company made with Defendant while doing business. It is further determined that Section 69(2)
does not bar a lawsuit filed by an unregistered firm from asserting a statutory or common law
claim.
The disputed transaction was a separate sale of the Firm's interest in the suit property to the
arguing Defendants rather than one that the Plaintiff firm—which specializes in building
construction—engaged in as part of its line of business. As was already noted, the bar of Section
69(2) can be more alluring regarding the sale. Furthermore, it cannot be said that the issue
involves enforcing a contractual right; instead, the plaintiff requests common law remedies
while asserting fraud and misrepresentation and the statutory right to an injunction. The
prohibition outlined in Section 69(2) does not apply to the current situation.
The claim filed by the appellant is exempt from Section 69(2) 's bar. The Trial Court denied the
weak application from the opposing Respondents because it accurately comprehended the facts
of the case. The High Court's disputed order must be overturned because it violates the pertinent
legal regulations. The request is granted.
24 Haldiram Bhujiawala (n 14)
136
JUS CORPUS LAW JOURNAL, VOL. 3, ISSUE 3, MARCH – MAY 2023
III. Whether the Court should have harmoniously interpreted Section 138 and Section 69(2)?
In the present case, the Court chose not to interpret the law harmoniously, but the researcher
believes the two statutes should have been read together. The researcher believes that if the
Court had read the two laws together, a different judgment would have been passed by the
Court, and it would have favored the Respondents.
To support the argument put forth by the researcher, the case Sai Accumulator Industries,
Sangamner v Sethi Brothers, 25 is brought to light by the researcher. The complaint brought by
an unregistered firm under Section 138 was found to be unsustainable in law by the Single Bench
of the Court due to the bar under Section 69(2).26
One similar landmark case was Amit Desai v Shine Enterprise27. The facts of the case are as
follows: The complainant-first Respondent, in this case, filed an accusation against the
petitioners in the court of the judicial magistrate. The petitioners who are accused of the charges
have submitted the current petition. According to the complainant, M/s. Shine Enterprises, a
partnership concern, is the name under which the complainant conducts business in
Madanapalle Town. The complainant's additional argument is that she had a business
relationship with the accused. Since 1996, they have bought the ‘P.E.P.U.P.’ black label, a non-
alcoholic beverage. After placing an order with him, they gave the accused a demand draught
for Rs. 1,67,328 to purchase non-alcoholic beverages.
However, the supply could not be sold because of pressure from the neighborhood police when
they received a second consignment. So they gave the accused person the item back. The accused
pledged to return the stock value they received in exchange for a credit note for Rs. 1,55,080. The
defendant wrote a check for Rs. 1,65,080/- payable to Co-operative Bank of Ahmedabad
Limited, Ahmedabad. The complainant attempted to cash the check by presenting it to their
financier, Canara Bank, Madanapalle branch. However, the cheque was returned with the
notation funds are insufficient.
25 Sai Accumulator Industries Sangamner v Sethi Brothers (2003) Crl App No 426/2003
26 Aparna Das et al., ‘Critical Analysis of Section 138 of Negotiable Instruments Act, 1881’ (2021) 4(6) International
Journal of Law, Management and Humanities <[Link] accessed 20 April 2023
27 Amit Desai v Shine Enterprises (2000) (1) ALD Cri 587
137
SHUKLA & SHARMA: RANGABASHYAM V RAMESH: A DILEMMA OF AN UNREGISTERED FIRM
Under section 138, the complainant complained about the accused. The accused came to the
court to have the proceedings stopped. The case needs to be more attainable, the court said,
because the complainant firm must be established following section 69 (2). The Court decided
on the case after reading the two pieces of legislation coherently.
CONCLUSION
Rangabashyam v Ramesh 2019 concerns the Negotiable Instruments Act 1881 and Partnership
Act 1932. The researcher disagrees with part of the Judgment of the Madras High Court and
believes that the Judge should have looked at the broader aspect of the law. The courts should
interpret the law while also considering the general part. If the law creates confusion as it did in
the present case, the courts should develop a more feasible version. In the present case, the use
of Section 69(2) was questioned; therefore, to avoid uncertainty in the future, the laws can be
either amended, or a better explanation with illustrations should be provided for better
administration of justice.
138