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Shivappa Reddy v. S. Srinivasan

Criminal Appeal · 2025 INSC 729Decided 19 May 2025
Crl.A. No.-004363-004363 - 2024
Justice Abhay S. Oka · Justice Augustine George Masih

Background

The appellant had filed a criminal complaint alleging that twelve cheques worth six crore rupees, issued by a partnership firm and its partners (including the respondent) towards refund of a sale consideration, were dishonoured due to "stop payment" instructions. The respondent, one of the named partners, sought to quash the proceedings against him on the ground that he had already retired from the firm before the cheques were issued, relying on a retirement deed. The Karnataka High Court accepted this defence and quashed the case against him, prompting the complainant to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that a partner cannot escape liability for dishonoured cheques merely by producing a private retirement deed: the Indian Partnership Act requires a retiring partner's exit to be formally notified to the Registrar of Firms and publicly notified (including in a vernacular newspaper) under Sections 32, 63 and 72 of the Act, none of which the respondent had done at the relevant time. The Court also noted the complaint had specifically alleged the respondent was involved in the firm's day-to-day affairs and was present when the cheques were signed, which was sufficient to satisfy Section 141 of the NI Act (liability of persons in charge of a company/firm's business) at this stage. Since these were disputed factual questions requiring evidence, they could not be resolved by simply quashing the case under Section 482 CrPC, so the High Court had exceeded its jurisdiction.

Lesson Learnt

Simply drafting or backdating a retirement deed does not legally remove someone as a partner of a firm. The law requires formal notice to the Registrar of Firms and public notification before a retiring partner is freed from liability for the firm's dealings, including dishonoured cheques.

Official source (sci.gov.in)View Judgment (PDF)

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