Muslimveetil Chalakkal Ahammed Haji Vs. Sakeena Beevi - Once the two facts, i.e., the publication of notice in the year 2012 for revocation of the unregistered power of attorney (Exh. A4) and the affidavit dated 30th April, 2013 are cumulatively taken into account, manifestly, limitation would start running from the later date because it is, at that stage, that the respondent-defendant finally refused execution of sale deed to the extent of her share in the suit property.

 SCI (2026.01.07) in Muslimveetil Chalakkal Ahammed Haji Vs. Sakeena Beevi  [2026 INSC 35,  C.A. NO(S). 3894 of 2025 & C.A. No. 3895 of 2022] held that; 

• Once the two facts, i.e., the publication of notice in the year 2012 for revocation of the unregistered power of attorney (Exh. A4) and the affidavit dated 30th April, 2013 are cumulatively taken into account, manifestly, limitation would start running from the later date because it is, at that stage, that the respondent-defendant finally refused execution of sale deed to the extent of her share in the suit property.

Excerpts of the Order;

# 1. Heard.

# 2. The present appeal is directed against the final judgment and order dated 16th October, 2020, passed by the High Court of Kerala at Ernakulam in R.F.A. No. 267 of 2016, whereby the first appeal preferred by Muslimveetil Chalakkal Ahammed Haji came to be dismissed, affirming the judgment and decree dated 30th October, 2015, rendered by the Sub- Judge, Chavakkad in Original Suit No.862 of 2013, by which the suit instituted by the plaintiff-appellant seeking specific performance of agreement to sell was dismissed.

Factual Background

# 3. Briefly stated, the facts relevant and essential for the disposal of the appeal are noted hereinbelow.

# 4. The plaint schedule property admeasuring approximately three acres thirty-five cents fell to the share of Shri Buquarayil Valappilakkayil Seethi Thangal (hereinafter ‘Seethi Thangal’), father of the respondent–Sakeena Beevi, by virtue of a registered partition deed bearing No. 1274 of 1985, registered in the office of the Sub-Registrar, Mullassery.

# 5. Pursuant to the death of Seethi Thangal on 22nd August, 2002, the plaint schedule property, comprised in Survey No. 116/7 of Kundazhiyoor Desom, together with the school building standing thereon and all appurtenant improvements, including ownership and management of the school, devolved upon his nine children, including the defendant-respondent.

# 6. All the nine legal heirs of Seethi Thangal executed an unregistered power of attorney (Exh. A4) in favour of the eldest son, Shri Muhammed Rafi Thangal, on 3rd September, 2002. Subsequently, on 4th September, 2002, the respondent Sakeena Beevi executed a separate registered power of attorney (Exh. B1) in favour of her son Shri Rasheeq Ahmed (DW-1).

# 7. The eldest brother, namely, Shri Muhammed Rafi Thangal, executed an agreement for sale (Exh. A1) dated 14th May, 2007 in favour of the plaintiff- appellant for a total consideration of Rs.2,70,00,000/-. A sum of Rs.25,00,000/- was paid as an advance at the time of execution of the agreement. The date of execution under the agreement (Exh. A1) was extended on three occasions, i.e., on 14th April, 2008 [Exh. A1(a)], 7th August, 2010 [Exh. A1(b)], and 7th July, 2011 [Exh. A1(c)]. On 14th November, 2012, the defendant- respondent caused publication of a newspaper notice revoking the unregistered power of attorney (Exh. A4) issued in favour of Shri Muhammed Rafi Thangal.

# 8. On 30th April, 2013, the defendant-respondent executed an affidavit (Exh. A5) ratifying the power of attorney (Exh. A4) and the acts carried out thereunder, and further expressing her consent to transfer her share in the plaint schedule property. Thereafter, on 8th May, 2013, the remaining eight siblings executed a sale deed conveying their collective 10/11th share in the entire chunk of land on which the school building exists in favour of the plaintiff-appellant.

# 9. As the defendant-respondent refused to execute the sale deed in respect of her share, the plaintiff- appellant instituted a suit for specific performance in the year 2013, which came to be registered as O.S. No. 862 of 2013 before the trial Court.

# 10. The trial Court dismissed the suit vide judgment and decree dated 30th October, 2015, primarily on the ground of limitation, and consequently denied the relief of specific performance as well as the alternate relief of refund of the advance amount to the plaintiff- appellant.

# 11. Aggrieved thereby, the plaintiff–appellant preferred an appeal before the High Court, which, while reversing certain findings recorded by the trial  Court, ultimately dismissed the suit on the grounds of lack of readiness and willingness on the part of the plaintiff-appellant to get the sale deed executed, as required under the Specific Relief Act, 1963, as well as on the ground of limitation.

# 12. The High Court held that the plaintiff-appellant failed to establish his continued readiness and willingness to perform the contract. It was observed that the payments made and the endorsements extending the agreement were obtained only from Shri Muhammed Rafi Thangal, the brother of the defendant–respondent, who lacked valid authority to execute and extend the contract after the defendant– respondent had executed a registered power of attorney (Exh.B1) in favour of her son Shri Rafeeq Ahmed (DW-1) thereby, by a deeming fiction, revoking the earlier unregistered power of attorney. Consequently, the payments made to Shri Muhammed Rafi Thangal were held not to be binding on the defendant–respondent.

# 13. The High Court further held that the agreement had become time-barred, observing that the breach on the part of the plaintiff-appellant occurred on 14th July, 2008, whereas the suit came to be instituted in  the year 2013, well beyond the period of three years prescribed under Article 54 of the Schedule to the Limitation Act, 1963.

# 14. The above judgment of the High Court is the subject matter of challenge in the present appeal by way of special leave.

# 15. It needs to be noted that during the pendency of the appeal, the parties were referred to mediation; however, the mediation efforts did not fructify in a settlement. Further, during the course of the hearing, Shri Gaurav Agrawal, learned senior counsel appearing for the plaintiff-appellant, on instructions, offered a sum of Rs.75,00,000/- to the defendant- respondent, as fair value for her 1/11th share which offer was declined outright.

Submissions on behalf of the plaintiff-appellant

# 16. Shri Gaurav Agrawal, learned senior counsel appearing for the plaintiff-appellant urged that although the plaintiff-appellant could have relinquished the said 1/11th share of the defendant- respondent in plaint schedule property, such a course would render the functioning of the school unviable and in breach of the requirements under the Kerala Education Rules, 1959, which mandates a  minimum extent of three acres of land for running a higher secondary school.

# 17. Shri Agrawal drew the Court’s attention to the affidavit (Exh. A5) dated 30th April, 2013 sworn by the defendant-respondent, whereby the agreement in favour of the plaintiff–appellant was affirmed and ratified. The said affidavit (Exh. A5) is an admitted document and reads as under: -

• “I, Mrs. B.V. Sakeena Beevi, aged 59 years, presently residing at Bukharyil Valapil House, W/o Fakrudheen Thangal, Bukharayil Ayittandiyil, Mathilakam Post - 680 685 do hereby solemnly affirm and state as follows:

• That myself one the legal heirs of deceased Mr. B.V. seethe Thangal, Ex. M.L.A., along with other legal heirs, had executed a valid power of attorney in favour of Mr. B.V. Muhammed Raphy Thangal, residing at Bukharayil Valappil house, Venkitangu, P.O. Padoor, on 3rd September 2002 regarding the property in Re-Survey No. 116/7 in Padoor Desam, Situated within the Mullassery Sub registrar Office. While the Power of Attorney to various officials including the Assistant Educational Officer, Mullassery. Now we have amicably settled all disputes and I hereby ratify the acts of the said Power of Attorney Holder Mr. B.V. Muhammed Raphy Thangal. I have no objection to perform all acts, deeds and things as assigned in the said Power of Attorney Holder Mr. B.V. Muhammed Raphy Thangal. I have no objection to perform all acts, deeds and things as assigned in the said Power of Attorney by me. I do hereby undertake to carry out the terms and conditions set out in the said Power of Attorney by me. I do hereby  undertake to carry out the terms and conditions set out in the said Power of Attorney and I will be personally bound by the terms and also I will be personally present whenever necessary. I have no objections in changing management involving ownership of Aleemul Islam Higher Secondary School, and ownership of properties of the above said school, in favour of Mr. Ahammed Haji, S/o Moidunni, Muslim Veettil Chalakkal House, Kundaliyoor desom, Engandiyoor amsom, as already submitted through my power of attorney holder.

• What is stated above is true to the best of my knowledge and belief.

• Dated this the 30th day of April, 2013.” [Emphasis supplied]

# 18. Shri Agrawal contended that once the defendant–respondent had agreed to the terms of the transaction and expressly conveyed her no-objection for transfer of ownership of the plaint schedule property through her power of attorney holder Shri Muhammed Rafi Thangal, the power of attorney executed (Exh. A4) in his favour, by necessary implication, stood ratified and reaffirmed, and the acts performed by the said power of attorney holder could not thereafter be questioned or doubted in a Court of law. He further urged that the findings recorded by the trial Court as well as the High Court, holding that the unregistered power of attorney (Exh. A4) executed by the defendant-respondent in favour  of her brother, Shri Muhammed Rafi Thangal, stood revoked with effect from 4th September, 2002, are contrary to the material available on record and suffer from manifest error.

# 19. He further drew the Court’s attention to the written statement filed by the defendant–respondent, wherein the validity of the agreement was expressly admitted, and the only objection raised pertained to limitation. It was pointed out that in the written statement, the defendant–respondent admitted that the agreement dated 14th May, 2007 (Exh.A1), was negotiated on her behalf by her son, Shri Rasheeq Ahmed, acting as her power of attorney holder. It was reiterated by learned senior counsel that the subsequent acts performed by Shri Muhammed Rafi Thangal were duly and expressly ratified by the defendant–respondent.

# 20. He further submitted that in the entire written statement, the defendant–respondent did not deny or dispute the affidavit (Exh. A5) dated 30th April, 2013, affirming her ratification of all the acts done by Shri Muhammed Rafi Thangal in furtherance of the unregistered power of attorney (Exh. A4).

# 21. Shri Agrawal also pointed out that the stand taken by the defendant–respondent that the unregistered power of attorney (Exh. A4) executed in favour of Shri Muhammed Rafi stood revoked on 4th September, 2002 upon execution of the registered power of attorney (Exh. B1) in favour of her son Shri Rasheeq Ahmed (DW-1), is belied by the fact that she herself affirmed validity of the agreement (Exh. A1) dated 14th May, 2007 which was executed by Shri Muhammed Rafi Thangal on strength of the disputed unregistered power of attorney (Exh. A4). Furthermore, she issued a notice dated 10th November, 2012 to Shri Muhammed Rafi and the educational authorities, for the first time, expressing her intent to revoke the said unregistered power of attorney (Exh. A4).

# 22. He further submitted that the trial Court had affirmed the evidentiary value of the affidavit (Exh.A5) by treating it as an admission of the defendant– respondent, but thereafter proceeded to discard the said document on the basis of the testimony of Shri Rasheeq Ahmed (DW-1), the son of the defendant- respondent. It was urged that if the defendant– respondent had any intention to prove revocation of  the power of attorney executed in favour of Shri Muhammed Rafi Thangal (Exh. A4) or to disown the affidavit (Exh. A5), she ought to have stepped into the witness box herself. However, admittedly, the defendant–respondent did not enter the witness box during the trial.

# 23. He, therefore, urged that it is a fit case wherein this Court should exercise its jurisdiction under Article 136 of the Constitution of India for balancing the equites by setting aside the impugned judgment and directing the specific performance of the agreement to the extent of the 1/11th share of the respondent-defendant.

Submissions on behalf of the defendant- respondent

# 24. Per contra, Ms. Menaka Guruswamy, learned senior counsel appearing for the defendant– respondent, vehemently and fervently opposed the submissions advanced on behalf of the plaintiff– appellant. She submitted that the power of attorney (Exh. A4) executed in favour of Shri Muhammed Rafi Thangal was an unregistered document, whereas the power of attorney executed (Exh. B1) in favour of Shri Rasheeq Ahmed (DW-1), the son of the defendant– respondent, was a registered instrument. It was contended that upon execution of the registered power of attorney (Exh. B1), the earlier unregistered power of attorney (Exh. A4) stood automatically revoked.

# 25. Without prejudice to the above, she further contended that the unregistered power of attorney (Exh. A4) executed by the defendant-respondent in favour of her brother, Shri Muhammed Rafi Thangal, did not authorise him to convey the plaint schedule property to any third party without the express consent of the executant, and, therefore, the defendant–respondent could not be bound by the acts undertaken by Shri Muhammed Rafi Thangal acting under the unregistered power of attorney (Exh. A4). It was further submitted that the original agreement (Exh. A1) inter se the parties, bearing the endorsement of Shri Rasheeq Ahmed (DW-1), the son of the defendant–respondent and her power of attorney, was executed on 14th May, 2007, and only a sum of Rs.25,00,000/- was paid as advance at the time of its execution. It was urged that the suit came to be instituted in the year 2013 and was thus clearly barred by limitation in view of the Article 54 of Schedule to the Limitation Act, 1963.

# 26. She further submitted that the affidavit (Exh. A5) was executed solely with a view to facilitating the continued functioning of the school and not for the purpose of transferring the share of the defendant- respondent in the suit property. It was contended that the said document was, therefore, rightly not relied upon by the trial Court as well as the High Court in favour of the plaintiff–appellant. She further submitted that the defendant–respondent is willing to make a counter offer to purchase the entire property for a consideration of Rs.3 crores, being the amount originally stipulated under the agreement (Exh. A1).

# 27. She, therefore, urged that this Court ought not to interfere with the concurrent findings of facts recorded by the trial Court and the High Court, whereby the suit instituted by the plaintiff-appellant was dismissed.

Discussion and Analysis

# 28. We have given our thoughtful consideration to the submissions advanced at bar and have gone through the material available on record.

# 29. At the outset, it may be noted that the plaint schedule 1/11th share of the defendant-respondent forms part of a larger tract of land admeasuring three acres thirty-five cents originally owned by her late father Shri Seethi Thangal. A school was built on the entire three acres area and is presently being run by the plaintiff-appellant.

# 30. The plaintiff-appellant has consistently asserted that, having regard to the requirements of the Kerala Education Rules, 1959, the campus of a higher secondary school cannot be reduced below three acres and, but for such statutory constraint, he would have conveniently given up the claim for the 1/11th share of the defendant-respondent in the plaint schedule property.

# 31. It is further a matter of record that during the course of hearing of the appeal, this Court made efforts to facilitate a settlement through mediation, and the plaintiff-appellant offered a handsome amount of Rs.75 lakhs to the defendant-respondent. However, the said offer was point-blank refused by the defendant-respondent, who seems to have been overcome by greed owing to the difficulty faced by the plaintiff-appellant who would risk losing the right to  operate the school in case the land area is reduced to less than three acres.

# 32. It is in this background that we shall now proceed to examine the material available on record to determine whether the view taken by the High Court in affirming the rejection of the suit by the trial Court is justified.

# 33. The High Court dismissed the suit primarily on two grounds, namely: -

• (i) The failure of the plaintiff-appellant to establish readiness and willingness to perform his obligations under the contract (Exh.A-1);

• (ii) limitation.

# 34. On the first aspect, it may be noted that the factum of three extensions dated 14th April, 2008 (executed by all nine co-sharers); 7th August, 2010 and 7th July, 2011(executed by the power of attorney holder, Shri Muhammed Rafi Thangal), stands duly proved by the plaintiff-appellant through unimpeachable and credible evidence. It was only on 14th November, 2012, that the defendant-respondent, for the first time, caused publication of a newspaper notice purporting to revoke the power of attorney  executed in favour of Shri Muhammed Rafi Thangal. Furthermore, the defendant-respondent does not even dispute the validity of the agreement (Exh. A1) dated 14th May, 2007 which was executed by Shri Muhammed Rafi Thangal acting on the unregistered power of attorney (Exh. A4). In this backdrop, the theory projected by the respondent that the power of attorney executed by her in favour of Shri Muhammed Rafi Thangal stood revoked as far back as the year 2002 is ex facie untenable and contrary to the record.

# 35. The most crucial and vital document, which, in our considered view, tilts the balance in favour of the plaintiff-appellant, is the affidavit (Exh. A5) executed by the defendant on 30th April, 2013. The execution of the said affidavit (Exh. A5) was neither disputed nor denied by the defendant–respondent, who admittedly did not enter the witness box in the suit proceedings. Instead, her son Shri Rasheeq Ahmed alone was examined as DW-1. A plain reading of the affidavit, particularly the highlighted portions (supra) thereof, clearly establish that the defendant– respondent not only ratified the acts performed by the power of attorney holder, her brother Shri Muhammed Rafi Thangal, but also expressly conveyed her no-objection to the change in management and so also the ownership of the school and the properties appurtenant thereto in favour of the plaintiff-appellant. Once the two facts, i.e., the publication of notice in the year 2012 for revocation of the unregistered power of attorney (Exh. A4) and the affidavit dated 30th April, 2013 are cumulatively taken into account, manifestly, limitation would start running from the later date because it is, at that stage, that the respondent-defendant finally refused execution of sale deed to the extent of her share in the suit property.

# 36. In this backdrop, we are of the firm view that the issue of limitation was erroneously decided by the trial Court as well as the High Court, leading to an unjustified rejection of the suit instituted by the appellant.

# 37. As the execution of the affidavit (Exh. A5) is not in dispute, the period of limitation would commence from the said date, i.e., 30th April, 2013. We have no hesitation in holding that the suit was instituted within the prescribed period of limitation, reckoned from the date of the affidavit. The said affidavit (Exh. A5) not only ratifies the acts performed by the power of attorney holder Shri Muhammed Rafi Thangal but also records the unequivocal no-objection of the executant–defendant to transfer the ownership of the property in favour of the plaintiff-appellant.

# 38. There is no dispute that pursuant to the last extension, the plaintiff-appellant paid the remaining sale consideration which was accepted by eight co- sharers of the defendant-respondent and the partial sale deed to that extent, stood executed in his favour on 8th May, 2013. Thus, the issue of readiness and willingness was also wrongly decided against the plaintiff-appellant and in favour of the defendant- respondent.

# 39. In this background, we are of the firm opinion that the High Court committed grave error in the facts as well as in law in dismissing the appeal suit filed by the plaintiff-appellant and affirming the judgment of the trial Court.

# 40. The impugned judgments do not stand to scrutiny and are hereby set aside.

# 41. The plaintiff-appellant is held entitled to conveyance of the 1/11th share of the defendant– respondent in the plaint schedule property. The trial Court shall determine the balance sale consideration payable to the defendant-respondent, having regard to the original consideration stipulated in the principal agreement for sale (Exh. A1), and shall apply simple interest at the rate of 9% thereon. The appellant shall deposit the said amount before the trial Court within a period of two months from the date of such determination, whereupon a registered sale deed in respect of the suit schedule property shall be executed in favour of the appellant.

# 42. The appeal is allowed in these terms. No costs.

# 43. Decree be prepared accordingly.

# 44. Pending application(s), if any, shall stand disposed of.

CIVIL APPEAL NO(S). 3895 OF 2022

# 45. This appeal is preferred against the interim order dated 19th November, 2021 passed by the High Court in Writ Appeal No.1425 of 2021.

# 46. The writ appeal was preferred by defendant- respondent Sakeena Beevi through her power of attorney holder Shri Rasheeq Ahmed (DW-1), assailing the order dated 11th October, 2021 passed by the learned Single Judge. By the said order, learned Single Judge upheld the decision of the Director of Public Instruction (DPI) rejecting the representation preferred by the writ petitioner against the proposed assignment of the ownership and management of Aleemul Islam Higher Secondary School, Padoor to the plaintiff-appellant (respondent No. 3 before the High Court). Accordingly, the writ petition was dismissed and the order of the DPI was affirmed.

# 47. The writ petitioner alleged that since she had not agreed to sell her share from the joint family land on which the school existed, the total land area of the school fell below 3 acres mandatorily required to operate a higher secondary school as per Rule 5A Chapter 3 of the Kerala Education Rules, 2005. The DPI, however, rejected the representation of the writ petitioner. As stated above, the writ petition also came to be rejected.

# 48. During the pendency of the writ appeal, the District Education Officer (DEO), Chavakkad, by order dated 15th November, 2021 recognised the plaintiff-appellant as the Manager of the school w.e.f. 3rd September, 2019.

# 49. The Division Bench stayed the effective operation of the order of learned Single Judge dated 11th October, 2021 and also the order dated 15th November, 2021 passed by the DEO during pendency of the writ appeal. Consequently, the management of the school was directed to be vested with the DEO, Chavakkad. While providing for this interim arrangement, the Division Bench directed the DEO to discharge the functions of the Manager on the joint instructions of the writ petitioner and the plaintiff- appellant.

# 50. Learned counsel representing the State of Kerala vehemently and fervently contended that looking to the disputes pending between the parties pertaining to 1/11th share of the defendant (writ appellant) in the suit schedule property, the High Court, rightly passed the impugned order making an interim arrangement for management of the school so that the functioning thereof would not suffer. He urged that as the DEO has been ordered to act under the instructions of the writ petitioner as well as the plaintiff-appellant herein, no prejudice would be caused to any of the parties in continuing such arrangement.

# 51. By way of judgment passed in Civil Appeal No. 3894 of 2022, we have granted the decree of specific performance in favour of the plaintiff-appellant. In view of the above decision, manifestly, the plaintiff- appellant would have available to him the full tract of 3 acres land for running the school as required under the Kerala Education Rules, 2005.

# 52. Hence, there is no further requirement of continuing the interim arrangement as directed by the High Court by the impugned order.

# 53. Consequently, the impugned order dated 19th November, 2021 passed by the High Court is set aside.

# 54. The appeal is allowed in these terms. No costs.

# 55. Pending application(s), if any, shall stand disposed of.

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Dhanasingh Prabhu Vs. Chandrasekar & Anr. - On the other hand, a partnership firm has no legal recognition in the absence of its partners. If a partnership firm is liable for the offence under Section 138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally.

  SCI (2025.07.14) in Dhanasingh Prabhu Vs. Chandrasekar & Anr. [2025 INSC 831, Special Leave Petition (Criminal) No.5706 of 2024)] held that; 

• However, jurisprudentially speaking, the partners of a partnership firm constitute the firm and a firm is a compendious term for the partners of a firm. This is opposed to the position of a director in a company which is a body corporate stricto sensu and such a company is a separate juristic entity vis-à-vis the directors.

• On the other hand, a  partnership firm has no legal recognition in the absence of its partners. If a partnership firm is liable for the offence under Section 138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally.

• To reiterate, in the case of a partnership firm, there is no concept of vicarious liability of the partners as such. The liability is joint and several because a partnership firm is the business of partners and one cannot proceed against only the firm without the partners being made liable. 

• Therefore, even in the absence of partnership firm being named as an accused, if the partners of the partnership firm are proceeded against, they being jointly and severally liable along with the partnership firm as well as inter-se the partners of the firm, the complaint is still maintainable.

• The accused in such a case would in substance be the partners of the partnership firm along with the firm itself. Since the  liability is joint and several, even in the absence of a partnership firm being proceeded against by the complainant by issuance of legal notice as mandated under Section 138 of the Act or being made an accused specifically in a complaint filed under Section 200 of CrPC, (equivalent to Section 223 of the BNSS), such a complaint is maintainable. 

• Thus, when it is a case of an offence committed by a company which is a body corporate stricto sensu, the vicarious liability on the categories of persons mentioned in sub-section (1) and sub-section (2) of Section 141 of the Act accordingly would be proceeded against and liable for the offence under Section 138 of the Act.

• In the case of a partnership firm on the other hand, when the offence has been proved against a partnership firm, the firm per se would not be liable, but liability would inevitably extend to the partners of the firm inasmuch as they would be personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm.

Excerpts of the Order;

Difference between a partnership firm and a company:

# 7. Predominantly a product of judge-made law, the law of partnership was first codified in India by the Indian Partnership Act, 1932. Prior to the coming in force of the Partnership Act, Chapter XI of the Indian Contract Act, 1872 (hereinafter ‘ICA’) defined a partnership, outlined the rights and obligations of partners and provided various provisions governing the operation and existence of partnerships. Section 239 of ICA defined a partnership as:

• "Partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business and to share the profits thereof."

7.1 The Partnership Act was promulgated as it was considered expedient to define and amend the law relating to partnership. As it stands today, partnership law is codified in the Partnership Act and the Limited Liability Partnership Act, 2008. It is trite that these legislations, like all codifications of partnership law in common law, are based on the law of agency.

7.2 Section 4 of the Partnership Act defines a partnership, partner, firm and firm name as follows:

“4. Definition of “partnership”, “partner”, “firm” and “firm name”.— “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.

(underlining by us) 

7.3 The definition in Section 4 of the Partnership Act is a departure from the erstwhile definition of partnership in Section 239 of ICA. A significant departure, inter alia, is the insertion of “acting for all” which brings in the concept of agency. An amendment of substantial import carried out by the Special Committee was with the intent to elucidate clearly the fundamental principle that the partners when carrying on the business of the firm are agents as well as principals. Pollock & Mulla also notes the salient distinction between the meanings of ‘partnership’ and ‘firm’. Tracing from Section 4, Pollock & Mulla clarifies that the word “partnership” is used throughout the Partnership Act in the defined sense of a relationship and where the partners are referred to collectively, the word “firm” is used. It is pertinent to recall that Explanation to Section 141 of the Act provides that for the purposes of that section, a company includes a firm or other association of individuals. Nevertheless, the distinction is crucial because it lends credence to the interpretation that reference in Section 141 is as much to the partners of the firm as it is to directors of a company.

7.4 According to Pollock and Mulla, 8th Edition, the definition of partnership in Section 4 of the Partnership Act contains three elements; (i) there must be an agreement entered into by all the persons concerned; (ii) the agreement must be to share the profits of a business; and (iii) the business must be carried on by all or any of the persons concerned, acting for all. All these elements must be present before a group of associates can be held to be partners. These three elements may appear to overlap, but they are nevertheless distinct. The third element shows that the persons of the group who conduct the business do so as agents for all the persons in the group and are therefore liable to account for all. This Court while elaborating the third essential element has held that the position of a partner in  the firm is thus not of a master and a servant or employer and employee which concept involves an element of subordination, but that of equality. It may be that a partner is being paid some remuneration for any special attention which he devotes but that would not involve any change of status or bring him within the definition of employee, vide Regional Director, Employees’ State Insurance Corporation vs. Ramanuja Match Industries, (1985) 1 SCC 218, Paras 4 and 9.

7.5 In Section 4 of the Partnership Act, it is clearly stated that persons who have entered into partnership with one another are individually called partners and collectively a firm and the name under which their business is carried out is called a firm name. Thus, while partnership is the relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all, the persons are collectively called a firm and the name of the firm is the firm name which is a compendious or collective term of partnership of the partners. The said Section also clearly implies that a firm or partnership is not a legal entity, separate and distinct from its partners.

7.6 As already stated above, the firm is a compendious term not distinct of the individuals who compose the firm. In other words, partnership is merely a convenient name to carry out business by partners. Thus, a firm is not an entity of persons in law but is merely an association of individuals and firm name is only a collective name of those individuals who constitute the firm. In other words, the firm name is merely an expression, only a compendious mode of designating the persons who have agreed to carry on business in partnership.

Thus, a firm may not be a legal entity in the sense of a corporation or a company incorporated under the Companies Act, 1956 or 2013, but it is still an existing concern where business is done by a number of persons in partnership. 

7.7 Insofar as the statutory definition of a company is concerned, the legislature has found it particularly cumbersome to provide a descriptive and inclusive definition. Perhaps this is why the Parliament in its wisdom defined ‘company’ in Section 2(2) of the Companies Act, 2013 (‘Companies Act’) not by enumerating the essential features of a company but “as a company incorporated under this Act or under any previous company law”.2 Keeping aside the omnibus statutory definition, several jurists have attempted to outline a definition of a company for doctrinal and precedential analysis. Lindley, a Jurist and Judge defined a company in the following terms:

“A company is an association of many persons who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising therefrom. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute to it or to whom it pertains are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted.”3 Section 9 of the Companies Act, 2013 provides as follows:

“9. Effect of registration From the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under  this Act and having perpetual succession with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name.” 7.8 While modern legislations and instruments have outlined and carved out more complex features, rights and obligations of a ‘company’, the fundamentals of Lindley’s definition continue to hold ground. The salient distinctions between a company and a partnership, including the rights and obligations flowing therefrom which are fundamental to common law, as well as the relevant statutes promulgated by the Parliament could be discussed at this stage.

Separate Legal Personality:

7.9 A partnership firm, unlike a company registered under the Companies Act, does not possess a separate legal personality and the firm’s name is only a compendious reference for describing its partners. This fundamental distinction between a firm and a company rests on the premise that the company is separate from its shareholders.

In that context, the words of Lord Macnaghten in Salomon vs. Salomon & Co. Ltd., [1897] AC 22 (HL), (“Salomon”) are instructive:

• “the company is at law a different person altogether from the subscribers......; and though it may be that after incorporation the business is precisely the same as it was before and the same persons are managers and the same hands receive the proceeds, the company is not in law, the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act.” 

7.10 This distinction does not, however, continue to hold true for a partnership firm. In the seminal case of Bacha F. Guzdar vs. CIT, (1954) 2 SCC 563, this Court had an opportunity to briefly address this distinction between a partnership firm and a company, wherein it was observed thus:

• “13. It was argued that the position of shareholders in a company is analogous to that of partners inter se. This analogy is wholly inaccurate. Partnership is merely an association of persons for carrying on the business of partnership and in law the firm name is a compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders.” 

7.11 The partnership name being only a compendious method of describing the partners, it stands to reason that a reference to the partners in their capacity as partners of the  firm will be sufficient to impute liability on the partners themselves, whereas directors of a company are made liable vicariously through the company, upon whom falls the primary liability. Thus, the partners and the partnership firm are one and the same. Unlike a company, a partnership firm has no independent corporate existence and has no distinct legal persona independent of its partners. Similarly, the partners of a firm are co-owners of the property of the firm unlike shareholders in a company who are not co-owners of the property of the company. This principle was also explained by the Calcutta High Court in Re: The Kondoli Tea Co. Ltd., (1886) ILR 13 Cal 43 where the transferors of a tea estate claimed that they were eligible to claim exemption from payment of ad valorem duty because the transferee was a company in which they themselves were shareholders. Negativing this contention, it was held that the company was a separate person and the transfer of the tea estate was a conveyance and in substance, a transfer to another person. 

7.12 Although the course of jurisprudential pronouncements led by the dictum of Privy Council in Bhagwanji Morarji Goculdas vs. Alembic Chemical Works Company Ltd., AIR 1948 PC 100 (“Bhagwanji Morarji Goculdas”), intermittently understood that Indian law – particularly, the Partnership Act – which has proceeded beyond English law and attributed some degree of personality to a partnership in accordance with the law in Scotland, a clarification was provided by this Court through its decision in Dulichand Laksminarayan vs. CIT, AIR 1956 SC 354 (“Dulichand”), which settled the position. It was held therein that any treatment as a separate unit for purposes of accommodating mercantile practices and commercial convenience did not obliterate the fundamental principle in law that a partnership firm is not a legal person. When this Court acknowledged in Dulichand that Indian law had relaxed its rigid notions to extend limited personality to a firm, this Court referred to the gradual relaxation of procedure to facilitate commercial convenience. For instance, it was explained that merchants show a firm as a debtor to each partner for what is brought into the common stock and each partner is shown as a debtor to the firm for all that he takes out of that stock. As traditionally, under the common law, a firm, not being a legal entity, could not sue or be sued in the firm name or sue or be sued by its own partner, for one cannot sue oneself, the rigid law of procedure was relaxed to give way to considerations of commercial convenience and a firm was permitted to sue or be sued in the firm name much like a corporate body. This Court further noted how Order XXX Rule 9 of the CPC allowed a firm to sue or be sued by another firm having some common partners or even to sue or be sued by one or more of its own partners, as if the firm is an entity distinct from its partners.

7.13 Similarly, it was explained that in taking partnership accounts and in administering partnership assets, the law has to some extent, adopted the mercantile view and the liabilities of the firm are regarded as the liabilities of the partners only in case they cannot be met and discharged by the firm out of its assets.

7.14 Most pertinent is that despite noting these relaxations in the rigid rules of procedure, this Court observed in Dulichand that ‘a firm name is merely an expression, only a compendious mode of designating the persons who have agreed to carry on business in partnership’. Any relaxations, either aforementioned or not, borne out of commercial  convenience or otherwise, do not deviate from the settled position that the name of a partnership firm is a convenient manner of referring to its partners.

7.15 We need not further dilate in extenso on this subject than to simply revisit the following erudite words of Krishna Iyer, J. in CIT vs. R.M. Chidambaram Pillai, (1977) 1 SCC 431 which also engage and follow this Court’s view in Dulichand:

• “5. First principles plus the bare text of the statute furnish the best guidelight to understanding the message and- meaning of the provisions of law. Thereafter, the sophisticated exercises in precedents and booklore. Here the first thing that we must grasp is that a firm is not a legal person even though it has some attributes of personality. Partnership is a certain relation between persons, the product of agreement to share the profits of a business. “Firm” is a collective noun, a compendious expression to designate an entity, not a person. In income tax law a firm is a unit of assessment, by special provisions, but is not a full person; which leads to the next step that since a contract of employment requires two distinct persons viz. the employer and the employee, there cannot be a contract of service, in strict law, between a firm and one of its partners. So that any agreement for remuneration of a partner for taking part in the conduct of the business must be regarded as portion of the profits being made over as a reward for the human capital brought in. Section 13 of the Partnership Act brings into focus this basis of partnership business.

• Xxx

• 16. The Indian law of partnership is substantially the same and the reference in counsel's submissions to the Scottish view of a firm being a legal entity is neither here nor there. Primarily our study must zero on the Indian Partnership Act and not borrow courage from foreign systems. In Bhagwanji Morarji Gokuldas [AIR 1948 PC 100 : (1948) 18 Comp Cas 205, 209] the Privy Council ruled that the Indian Partnership Act went beyond the English Partnership Act, 1890, the law in India attributing personality to a partnership being more in accordance with the law of Scotland. Even so, Sir John Beaumont, in that case, pointed out that the Indian Act did not make a firm a corporate body. Moreover, we are not persuaded by that ruling of the Privy Council, particularly since a pronouncement of this Court in Dulichand [Dulichand Laksminarayan v. CIT, AIR 1956 SC 354 : 1956 SCR 154 : (1956) 2 ITR 535] strikes a contrary note. We quote:

• “In some systems of law this separate personality of a firm apart from its members has received full and formal recognition as, for instance, in Scotland. That is, however, not the English common law conception of a firm. English lawyers do not recognise a firm as an entity distinct from the members composing it. Our partnership law is based on English law and we have also adopted the notions of English lawyers as regards a partnership firm.” The life of the Indian law of partnership depends on its own terms although habitually  courts, as a hangover of the past, have been referring to the English law on the point. The matter is concluded by the further observations of this Court:

“It is clear from the foregoing discussion that the law, English as well as Indian, has, for some specific purposes, some of which are referred to above, relaxed its rigid notions and extended a limited personality to a firm. Nevertheless, the general concept of a partnership, firmly established in both systems of law, still is that a firm is not an entity or ‘person’ in law but is merely an association of individuals and a firm name is only a collective name of those individuals who constitute the firm. In other words, a firm name is merely an expression, only a compendious mode of designating the persons who have agreed to carry on business in partnership.

According to the principles of English jurisprudence, which we have adopted, for the purposes of determining legal rights ‘there is no such thing as a firm known to the law as was said by James, L.J., in Ex parte Corbett : In re Shand [(1880) 14 Ch D 122, 126 : 42 LT 164 : 28 WR 569] . In these circumstances to import the definition of the word ‘person’ occurring in Section 3(42) of the General Clauses Act, 1897, into Section 4 of the Indian Partnership Act will, according to lawyers, English or Indian, be totally repugnant to the subject of partnership law as they know and understand it to be.”
In Narayanappa [Addanki Narayanappa v.Bhaskara Krishtappa, AIR 1966 SC 1300, 1303 : (1966) 3 SCR 400] the view taken by this Court accords with the position above stated.” (emphasis supplied) 7.16 Finally, on this question, Krishna Iyer, J. speaking for this Court noted that under Indian law, a partnership is only a collective of separate persons and is not a legal person in itself.

Perpetual Succession:

7.17 As a logical corollary of distinct and separate juristic identity, an incorporated company also has perpetual succession i.e., perpetual existence agnostic of transfer of shares. A company does not ordinarily extinguish because of change in shareholding. On the other hand, a partnership firm’s fundamental identity is contingent on the partners and undergoes a change with a change in partners, subject to contract. Section 42(c) of the Partnership Act provides that subject to contract between the partners, a firm is dissolved by the death of a partner. Per contra, the position of a company could not be made clearer than by the following illustration in Professor Gower’s Principles of Modern Company Law (3rd Edn. 1969), at p.76:

• “During the war all the members of one private company, while in general meeting, were killed by a bomb. But the company survived; not even a hydrogen bomb could have destroyed it.” 7.18 Although one might argue that from the perspective of a merchant or even income tax law, a firm appears to continue irrespective of the entrance and exit of partners, Lindley explained the orthodox legal view, which continues to hold ground, on partnership, in the following words:

• "The law, ignoring the firm, looks to the partners composing it; any change amongst them destroys the identity of the firm; what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities. In point of law, a partner may be the debtor or the creditor of his co-partners, but he cannot be either debtor or creditor of a firm of which he is himself a member."    (Underlining by us) Liability of Partners:

7.19 The liability of partners for the debts of the business is unlimited and they are jointly and severally liable for all business obligations of the partnership firm. Sections 25 and 26 of the Partnership Act are relevant in this regard, which are reproduced as under:

• “25. Liability of a partner for acts of the firm.—Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.

• 26. Liability of the firm for wrongful acts of a partner.—Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefor to the same extent as the partner.” Section 25 provides that every partner is liable jointly with all the other partners and also severally for all acts of the firm done by the partner. Since a firm is not a legal entity but only a collective name for all the partners, it does not have any legal existence apart from its partners. Therefore, any liability of a firm has the same effect of a liability against the partners. This is because, the partners remain liable jointly and severally for all acts of the firm, vide Dena Bank vs. Bikhabhai Prabhudas Parekh and Co., (2000) 5 SCC 694. 

7.20 Moreover, the partners of a firm have unlimited liability to the creditors of the firm. This is as opposed to a limited company or a limited liability partnership, wherein the liability of the directors or the shareholders is to the extent of their share in the limited company or limited liability partnership and limited to the nominal value of the shares held by them or the amount guaranteed by the shareholder when it comes to a company. Thus, the debt of the firm is the personal debt of a partner and the debt of the firm has to be incurred by each partner as a financial personal liability.

7.21 Insofar as criminal liability is concerned, once it is established that an illegal act has been committed by the firm or its partners, then the partners will be jointly liable for it. Moreover, the act constituting an offence will also have to be decided with reference to the statute creating such an offence i.e. the Negotiable Instruments Act, which is the Act under consideration. When Section 25 of the Partnership Act is read together with Section 145 of the Act, in the context of dishonour of a cheque, the partner of a firm who is also liable jointly with a firm, can however rebut the statutory presumption.

7.22 Conversely, Section 26 states that where by the wrongful act or omission of a partner, acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injuries are caused to any third party, or any penalties are incurred, the firm is liable therefore to the same extent as the partner. The liability of the firm for acts done by the partner would arise when such acts are done in the ordinary course of the business of the firm. 7.23 Moreover, since the firm by itself cannot transact any business, if a partner of the firm commits any breach, all the partners would become liable for the consequent penalties, just as the firm would be liable. Further, if a penalty is imposed on a partnership firm for contravention of a statute, it amounts to levy of penalty on the partners also and there is no separate or independent penalty on the partners for the said contravention.

7.24 However, the liability of a shareholder in a company is limited to the nominal value of shares held by them or the amount guaranteed by the shareholder. The separate property of the shareholder is beyond a creditor seeking to enforce its dues against the company.

Firm Name:

# 8. It is therefore appropriate to remind ourselves that a partnership firm, unlike a company registered under the Indian Companies Act or a limited liability partnership registered under the Limited Liability Partnership Act, 2008, is not a distinct legal entity and is only a compendium of its partners. Even the registration of a firm does not mean that it becomes a distinct legal entity like a company. Hence, the partners of a firm are co-owners of the property of the firm, unlike shareholders in a company who are not co-owners of the property of the company.

8.1 According to Lindley and Banks on Partnership, 21st Edition, it is important to identify the precise significance of a firm name since it represents an attribute which tends to encourage the commercial rather than the legal view of a firm. According to Lindley, “……the name under which a firm carries on business is in point of law a conventional name applicable. Only to the persons who on each particular occasion when the name is used, are members of the firm." 8.2 The firm name is thus a convenient method of describing a group of persons associated together in business  at a certain point of time: no more or no less. If a number of people carry on business under such name or style, anything which they may do in that name or style will be just as effective as if their individual names had been used. An obvious example of this is the use of firm name on bills of exchange and promissory notes.

# 9. The aforesaid principles have to be applied to Sections 138 and 141 of the Act. For immediate reference, the said sections are extracted as under: . . . 

9.1 Section 138 of the Act creates an offence for dishonour of a cheque for, inter alia, insufficiency of funds in the account by a deeming fiction. The complainant who is a victim of the dishonour of cheque issued by an accused has  the right to file a private complaint in terms of Section 200 of the CrPC, (equivalent to Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (for short, “BNSS”)). When the said offence is proved against an individual/natural person, he is punished with imprisonment for a term which may be extended to two years or with fine which may extend to twice the amount of the cheque. But when such an offence is committed by a company, which is an artificial juristic entity, Section 141 of the Act applies. The said Section states that if the person committing an offence under Section 138 of the Act is a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Since an artificial juristic entity such as a company cannot be punished with imprisonment, by a deeming fiction certain persons associated with such an artificial juristic entity are deemed to be guilty of the offence and made liable to be proceeded against and punished accordingly. This is an instance of vicarious liability on every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company. This is for the reason that a company is a separate entity vis-à-vis its shareholders or those who are in charge of the conduct of its business since a company is an artificial juristic entity. Thus, the liability would be on the company as well as on the category of persons mentioned above. Such a person must be both in charge of, as well as responsible to, the company for the conduct of the business of the company. However, the aforesaid category of person who is deemed to be guilty of the offence along with the company, can escape punishment (i) if he can prove that the offence was committed without his knowledge; or (ii) that he had exercised all due diligence to prevent the commission of such an offence. Hence, by way of a proviso to sub-section (1) to Section 141 of the Act, two defences are provided for the category of persons named in sub-section (1) of Section 141.

9.2 The second proviso to sub-section (1) of Section 141 is an exception for a person who is a director of the company who shall not be liable for prosecution under Chapter XVII of   the Act. The second proviso is not relevant for the purpose of this case as the said proviso refers to ex-officio directors representing the Central Government or state governments or a financial corporation owned or controlled by the Central Government or the state government, as the case may be. 

9.3 Sub-section (2) of Section 141 begins with a non- obstante clause. It extends the scope of categories of persons associated with the company who could also be deemed to be guilty of an offence under Section 138 of the Act and shall be liable to be proceeded against and punished accordingly. Sub-section (2) of Section 141 states that where the offence has been committed by a company and it is proved that the offence has been committed with the (i) consent; or (ii) connivance of; or (iii) is attributable to, any neglect on the part of any director, manager, secretary or other officer of the company, such aforesaid categories of persons shall also be deemed to be guilty, proceeded against and punished accordingly. While sub-section (1) of Section 141 restricts the category of persons who would be deemed to be liable when the offence is committed by a company, sub-section (2) of Section 141 extends the scope of liability to further categories  of persons namely, director, manager, secretary or other officer of the company to be made liable provided there is proof that such category of persons associated with the company had committed the offence with the consent or connivance of, or due to any negligence on their part. The expression “shall also be deemed to be guilty” in sub-section (2) of Section 141 of the Act would imply that the object and purpose of the said provision is to encompass the categories of persons mentioned in that sub-section owing to a criminal intent or negligence attributable on their part. 

9.4 Thus, while under sub-section (1) of Section 141 of the Act, the criminal liability on the category of persons named in the said sub-section is owing to the position that person holds in the company, when the company is said to have committed the offence under Section 138 and therefore the deeming fiction under sub-section (2) of Section 141 of the Act, on the other hand, there has to be a proof with regard to consent or connivance for the committing of the offence or a criminal negligence on the part of the director, manager, secretary or other officer of the company who shall also be deemed to be guilty of the offence under Section 138 of the Act. Thus, under sub-section (2) of Section 141 of the Act, when the company is guilty of the offence under Section 138 of the Act, a director, manager, secretary or other officer of the company shall also be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly, provided there is proof of mens rea on the part of such category of persons. Hence, a director, manager, secretary or other officer of the company cannot be proceeded against per se by virtue of the position they hold in the company but can be proceeded against only when there is proof that the offence under Section 138 was committed by the company with their consent or connivance or due to negligence on their part. The standard of proof is higher under sub-section (2) of Section 141 vis-à-vis the category of persons mentioned therein with regard to their specific role in the commission of the offence under Section 138. This implies that the primary liability of the company is transferred to the above categories of persons who are deemed to be guilty vicariously having regard to the deemed penal nature of the offence under Section 138 of the Act.

9.5 The Explanation to Section 141 has two clauses. Clause (a) defines a company to mean any body corporate and includes a firm or other association of individuals. The expression “company” encompasses, inter alia, a body corporate which refers to a company incorporated under the provisions of the Companies Act or a statutory body. The expression “company” is inclusive inasmuch as it includes a firm, meaning thereby a partnership firm, as per the provisions of the Partnership Act, as well as a limited liability partnership or other association of individuals. Clause (b) of the Explanation defines a director as mentioned in sub- section (2) of Section 141 of the Act in relation to a firm to mean a partner in the firm. Thus by a legislative device an inclusive definition is added by way of an Explanation to Section 141 of the Act inasmuch as in jurisprudence and in law, a company is a distinct body corporate and separate juristic entity as compared to a partnership firm. 

9.6 On a conjoint reading of the various clauses of Section 141, what emerges is that the expression “company” has been used in an expansive way to include not just a company incorporated under the provisions of the Companies Act stricto sensu but also any body corporate such as a statutory company as well as other artificial juristic entity such as a partnership firm or other association of individuals. Hence, the expression “director” in sub-section (2) of Section 141 is not restricted to a director of an incorporated company or a statutory body, but also includes a partner of a firm. The expression “director” in sub-section (2) of Section 141 of the Act in relation to a firm means a partner, which is also a legislative device adopted by the Parliament knowing fully well and being conscious of the fact that a partnership firm, jurisprudentially speaking, does not stand on par with a director of a body corporate. Since the Parliament has used the expression “company” encompassing all types of juristic persons, it was necessary to give an expanded definition to the expression “director” in relation to a firm to mean a partner in the firm. Therefore, the inclusion of a firm within the meaning of the expression “company” is by a legal fiction and by way of a legislative device only for the purpose of creating a liability on the partners of the firm, which in any case, they are liable under the law of partnership in India. But the definition of the word company including a  partnership firm has been incorporated in the Explanation for the sake of convenience, as otherwise a similar provision would have to be inserted for the very same purposes. Instead of replicating the same definition for different kinds of juristic entities, the Parliament has thought it convenient to add an Explanation to define a company for the purpose of Section 141 of the Act in the context of an offence committed by, inter alia, a company, as understood within the meaning of the Companies Act, and also include a firm or other association of individuals within the definition of company. Similarly, under clause (b) of the explanation, the expression “director”, in relation to a firm, means a partner in the firm.

9.7 This also demonstrates the fact that while a director is a separate persona in relation to a company, in the case of a partnership firm, the partner is not really a distinct legal persona. This is because a partnership firm is not really a legal entity separate and distinct as a company is from its directors but can have a legal persona only when the partnership firm is considered along with its partners. Thus, the partnership firm has no separate recognition either jurisprudentially or in law apart from its partners. Therefore,  while a director of a company can be vicariously liable for an offence committed by a company, insofar as a partnership firm is concerned, when the offence is committed by such a firm, in substance, the offence is committed by the partners of the firm and not just the firm per se. Therefore the partners of the firm are liable for the dishonour of a cheque, even though the cheque may have been issued in the name of the firm and the offence is committed by the firm. Therefore, in law and in jurisprudence, when a partnership firm is proceeded against, in substance, the partners are liable and the said liability is joint and several and is not vicarious. This is unlike a company which is liable by itself and since it is an artificial juristic entity, the persons in charge of the affairs of the company or who conduct its business only become vicariously liable for the offence committed by the company. 

9.8 However, jurisprudentially speaking, the partners of a partnership firm constitute the firm and a firm is a compendious term for the partners of a firm. This is opposed to the position of a director in a company which is a body corporate stricto sensu and such a company is a separate juristic entity vis-à-vis the directors. On the other hand, a  partnership firm has no legal recognition in the absence of its partners. If a partnership firm is liable for the offence under Section 138 of the Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally. This underlying distinction between a partnership firm and a company which is a body corporate has to be borne in mind while dealing with an offence committed by a company or a partnership firm, as the case may be, within the meaning of Section 138 read with Section 141 of the Act. To reiterate, in the case of a partnership firm, there is no concept of vicarious liability of the partners as such. The liability is joint and several because a partnership firm is the business of partners and one cannot proceed against only the firm without the partners being made liable. 

9.9 Therefore, even in the absence of partnership firm being named as an accused, if the partners of the partnership firm are proceeded against, they being jointly and severally liable along with the partnership firm as well as inter-se the partners of the firm, the complaint is still maintainable. The accused in such a case would in substance be the partners of the partnership firm along with the firm itself. Since the  liability is joint and several, even in the absence of a partnership firm being proceeded against by the complainant by issuance of legal notice as mandated under Section 138 of the Act or being made an accused specifically in a complaint filed under Section 200 of CrPC, (equivalent to Section 223 of the BNSS), such a complaint is maintainable. 

9.10 Thus, when it is a case of an offence committed by a company which is a body corporate stricto sensu, the vicarious liability on the categories of persons mentioned in sub-section (1) and sub-section (2) of Section 141 of the Act accordingly would be proceeded against and liable for the offence under Section 138 of the Act. In the case of a partnership firm on the other hand, when the offence has been proved against a partnership firm, the firm per se would not be liable, but liability would inevitably extend to the partners of the firm inasmuch as they would be personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm. 

9.11 To reiterate, when the partnership firm is only a compendious name for the partners of the firm, any offence committed under Section 138 read with Section 141 of the  Act would make the partners of the firm jointly and severally liable with the firm. If, on the other hand, the Parliament intended that the partners of the firm be construed as separate entities for the purpose of penalty, then it would have provided so by expressly stating that the firm, as well as the partners, would be liable separately for the offence under Section 138 of the Act. Such an intention does not emanate from Section 141 of the Act as the offence proved against the firm would amount to the partners of the firm also being liable jointly and severally with the firm. Therefore, there is no separate liability on each of the partners unless sub- section (2) of Section 141 applies, when negligence or lack of bona fides on the part of any individual partner of the firm has been proved.

# 10. In view of the aforesaid discussion, we hold that the High Court was not right in rejecting or dismissing the complaint for the reason that the partnership firm was not arraigned as an accused in the complaint or that notice had not been issued to it under Section 138 of the Act. In view of the aforesaid discussion, the notice issued to the partners of the firm in the instant case shall be construed to be a notice  issued to the partnership firm also viz., ‘Mouriya Coirs’. Permission is granted to arraign the partnership firm as an accused in the complaint.

# 11. Consequently, the impugned order of the High Court is set aside. The complaint bearing STC No.1106/2022 is restored on the file of the Court of the learned Judicial Magistrate No. II, Pollachi. The trial court is directed to dispose of the complaint in accordance with law.

# 12. The appeal is allowed in the aforesaid terms.

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