Partner cannot be liable for the Firm taking the Loan

The Supreme Court recently in the Case of [Dilip Hariramani v Bank of Baroda] held, that criminal liability for a cheque bounce case under Section 138 of the Negotiable Instrument Act can’t be decided over a person just because he is a partner in a firm that took a loan or because he was guarantor for that loan.

The case was being heard before the Bench of Justices Ajay Rastogi and Sanjiv Khanna, it was observed that criminal liability under Section 141 of the Negotiable Instruments Act can’t be decided merely because the partner of the Firm holds civil liability. It was further observed that the provision under Section 141 imposes vicarious liability only in case if the offense is committed by the Company/Firm.

Background:

The respondent Bank of Baroda issued term loans to M/s Global Packaging wherein the appellant is a partner. A partner in the firm issued three cheques in his name for a loan extended to the firm. As the cheques were dishonored, the Bank filed a case under Section 138 of the NI Act against the said partner and the appellant.

When the matter reached the Supreme Court, the court noted that the appellant did not issue any cheque. The Court decided that in absence of any evidence proving the involvement of the appellant towards the issuance of the cheques and thus, the appellant can’t be convicted.

The court took into consideration the case of Girdhari Lal Gupta v D M Mehta and Anr to decide the case.

Also, the Apex Court held that the appellant can’t be held just because he is a partner in the firm. Hence, the Court set aside the conviction held by the lower courts and thus acquit the appellant.

Conclusion:

In conclusion, it can be said that merely because a person is a partner at a firm, he can’t be held liable for offenses committed by any other partner of the firm, neither can he be charged merely if he is a guarantor to a loan

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