Negotiable Instruments Act. Cheque issued to managing partner of partnership firm. Complaint filed in the name of partnership firm not maintainable. Firm is neither ‘payee’ nor ‘holder in due course’. Karnataka High Court.

Srinidhi Finance and Investment Corporation vs Basavanthappa. Criminal Appeal 2828/2011 decided on 23 November 2020.

Judgment Link: http://judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/352719/1/CRLA2828-11-23-11-2020.pdf

Relevant paragraphs: 21 & 22 In the present case, cheque has been issued by the accused in the name of Siddalingappa Tippanna Satyappanavar, who is ‘payee’. Holder in due course of the cheque is none other than the ‘payee’- Siddalingappa Tippanna Satyappanavar.

24. Proviso (b) to Section 138 of NI Act states that ‘the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque (within thirty days), of the receipt of information by him from the bank regarding the return of the cheque as unpaid.’

27. As noticed in Ex.P.1 and in Ex.P.3 and in the complaint filed by the complainant, it is not in dispute that the payee and holder in due course of the cheque is one Sri. Siddalingappa Tippanna Satyappanavar. The legal notice got issued by complainant-Ex.P.3 is not by the payee or holder in due course but by the complainant-Partnership Firm. The complaint filed before the learned Magistrate is also not by the payee or holder in due course but by the partnership firm M/s. Srinidhi Finance and Investment Corporation, Gadag, by its Managing Partner Sri. Siddalingappa Tippanna Satyappanavar. As stated earlier Section 142(1)(a) clearly states that no Court shall take cognizance of any offence punishable under Section 138 of NI Act, except on a complaint, in writing made by the ‘payee’ or, as the case  may be, the holder in due course of the cheque. At the cost of repetition, it is seen that the payee and holder in due course of the cheque is not the complainant in the present case. Therefore, the primary mandatory requirement of Section 138 of NI Act, has not been fulfilled by the complainant herein. Therefore, the initiation of the complaint itself is not in accordance with law.

34. Admittedly, in the present case, cheque has not been issued in the name of partnership firm. It is also  not the case of the complainant that it is a proprietary firm which stands on different footing. Therefore, it is clearly, evident from the factual aspect that the complainant firm is not the payee or the holder in due course.

Appeal dismissed.

Compiled by S. Basavaraj, Daksha Legal.