Resigned Partner Cannot Be Held Liable for Cheque Issued Post-Resignation Under Section 138 of NI Act

The Respondent No. 2 (Complainant) extended a friendly loan of Rs. 8,00,000 for business purposes to the Petitioner and Respondent No. 4

Respondent No. 4, acting as a partner of the firm "Parth Enterprise," issued a cheque dated 18.12.2021 to repay the debt; however, the cheque was dishonored upon presentation

Consequently, Criminal Case No. 489/2022 was filed under Section 138 of the Negotiable Instruments Act, and the JMFC, Gandhinagar, issued summons to the Petitioner on 01.07.2022

The Petitioner moved the High Court to quash the proceedings, contending he was not a signatory and had resigned from the partnership firm on 28.02.2019, long before the cheque was issued

Whether a former partner can be held vicariously liable under the Negotiable Instruments Act for a cheque issued by the firm years after his resignation.

Section 482 of the Code of Criminal Procedure regarding the inherent powers of the High Court to quash proceedings to prevent abuse of process

vicarious liability under Section 138 and Section 141 of the Negotiable Instruments Act, which dictate that liability for a dishonored cheque attaches to the signatory and those in charge of the conduct of the business of the firm at the time the offense was committed

The court examined documentary evidence, specifically a communication dated 28.02.2019 and an Affidavit-cum-Declaration, which proved the Petitioner had resigned from the partnership three years prior to the issuance of the cheque

The court noted that Respondent No. 4 had expressly accepted sole responsibility for all future transactions and cheque issuances from the firm's account starting from February 2019

Since the cheque in question (No. 000007) was issued on 18.12.2021—well after the Petitioner's exit—the court reasoned that the Petitioner had no connection with the firm’s management or the specific transaction

no prima facie case existed to fasten liability upon a resigned partner for the acts of the remaining partners

The court allowed the petition and quashed Criminal Case No. 489/2022 and all consequential proceedings pending before the Judicial Magistrate First Class, Gandhinagar, specifically qua the Petitioner. Rule was made absolute.