2003 (9) TMI 557 - HC - Companies Law

Effect of non-registration, Dishonour of cheque for insufficiency, etc., of funds in account

Summary

Issues:
1. Validity of a private complaint filed by a partner of an unregistered firm under section 138 of the Negotiable Instruments Act, 1881.

Analysis:
The High Court of Karnataka addressed the issue of whether a private complaint filed by a partner of an unregistered firm is maintainable under section 138 of the Negotiable Instruments Act, 1881. The revision petitioner contended that the dismissal of the complaint by the Trial Court based on section 69 of the Partnership Act was incorrect. The petitioner argued that while an unregistered firm may not be able to file a civil suit, there is no bar to filing a private complaint for criminal liability, especially concerning dishonored cheques.

The respondent, on the other hand, relied on section 69(2) of the Partnership Act, which states that a suit to enforce a right arising from a contract cannot be instituted by an unregistered firm against a third party. The respondent cited a decision by the Andhra Pradesh High Court to support this argument. The High Court examined the provisions of section 69(2) of the Partnership Act and noted that it specifically bars the institution of civil suits by unregistered firms.

The High Court analyzed various legal precedents to determine the applicability of section 69(2) of the Partnership Act in criminal cases. It referenced a Kerala High Court judgment stating that an unregistered partnership firm can prosecute a complaint under section 138 of the Negotiable Instruments Act. Additionally, the Supreme Court's ruling emphasized that criminal prosecutions under section 138 are for penal liability and not for recovery of money, reinforcing the distinction between civil and criminal proceedings.

Based on the legal principles established by the Supreme Court and other High Courts, the High Court of Karnataka concluded that section 69(2) of the Partnership Act does not apply to criminal cases involving dishonored cheques. The Court held that the Trial Court's dismissal of the complaint was incorrect and ordered the matter to be remitted back for further proceedings in accordance with the law. The revision petition was allowed, setting aside the Trial Court's order and directing the recording of sworn statements and proper disposal of the complaint.

In summary, the judgment clarified that while an unregistered partnership firm may be barred from filing civil suits under section 69(2) of the Partnership Act, this restriction does not extend to criminal complaints under section 138 of the Negotiable Instruments Act. The decision emphasized the distinction between civil and criminal liabilities in such cases, ensuring that partners of unregistered firms can pursue criminal complaints for dishonored cheques despite the non-registration of the firm.