The Kerala High Court has clarified that a change in the name of a partnership firm does not invalidate prosecution under Section 138 of the Negotiable Instruments Act, provided the underlying liability and identity of the partners remain unchanged. This judgment reinforces the principle that the legal personality of a partnership is inseparable from its partners, and procedural formalities like name changes do not extinguish enforceable obligations.
Background & Facts
The Dispute
The revision petitioner, Manoj R., issued post-dated cheques totaling Rs.14,00,000/- to M/s. Akin Communications, a partnership firm engaged in media advertising, to discharge a debt owed by M/s. Skyblue Enterprises Private Ltd., which he claimed to coordinate. The complainant received Rs.9,50,000/- through honoured cheques, but one cheque dated 03.11.2007 for Rs.1,50,000/- was dishonoured due to insufficient funds. A statutory notice was sent but went unanswered, prompting the complainant to file a criminal complaint under Section 138 of the Negotiable Instruments Act.
Procedural History
- 2010: Criminal Complaint CC No.5106/2010 filed before Judicial Magistrate First Class - IV, Ernakulam
- 2015: Trial court convicted the accused under Section 138 NI Act, imposed fine of Rs.2,00,000/- with compensation under Section 357(1)(b) Cr.P.C.
- 2016: Additional Sessions Court-II dismissed Criminal Appeal No.364/2015
- 2026: Revision petition filed before Kerala High Court challenging conviction
Relief Sought
The revision petitioner sought quashing of the conviction, arguing that the complainant lacked standing due to a name change of the firm, that the cheque was obtained unlawfully, and that a prior settlement of Rs.2,50,000/- had discharged the liability.
The Legal Issue
The central question was whether a change in the name of a partnership firm, without dissolution or change in partners, invalidates prosecution under Section 138 NI Act, and whether the accused’s failure to rebut the statutory presumption of liability negates conviction.
Arguments Presented
For the Petitioner
The accused contended that: (1) the complainant firm, M/s. Akin Communications, had been renamed to Maniamkot Advertising Company in 2009, making the complainant an unauthorized representative; (2) the cheque was obtained unlawfully and misused; and (3) a prior settlement of Rs.2,50,000/- for three pending cases had discharged the debt, rendering the prosecution fraudulent. He relied on the absence of documentary proof for payment and lack of written compromise.
For the Respondent
The State and complainant argued that: (1) the partnership deed (Ext.P6) proved only a name change, not a new entity; (2) the same partners continued to operate the business; (3) the accused had admitted receipt of Rs.9,50,000/- from the same cheques; and (4) no stop memo or complaint was filed despite alleged misuse, undermining the credibility of his claims.
The Court's Analysis
The Court emphasized that Section 138 NI Act operates on the presumption that a cheque is issued for discharge of a legally enforceable debt. The burden then shifts to the accused to rebut this presumption by preponderance of probabilities. The Court noted that the accused failed to produce any evidence supporting his claims of unlawful acquisition or settlement.
"The accused has neither filed a stop memo nor any complaint before any authority alleging misuse of his cheque and the said conduct, in the light of the aforesaid version of the accused, does not stand the test of a prudent man's mindset."
Regarding the firm’s name change, the Court relied on the settled principle that a partnership is not a separate legal entity but an association of individuals. The firm name is merely a collective designation. The Court cited Dhanasingh Prabhu v. Chandrasekhar to affirm that partners remain jointly and severally liable, and a change in trade name does not alter the legal identity of the persons behind the firm.
"Partnership is merely a convenient name to carry out business by partners and the firm is not an entity of persons in law but, merely an association of individuals."
The Court found PW1’s testimony, corroborated by Ext.P6, sufficient to establish standing. The accused’s allegations of fraud and settlement were speculative and unsupported by documents, rendering them unworthy of credit.
The Verdict
The revision petition was dismissed. The Court upheld the conviction under Section 138 NI Act, holding that a partnership firm’s name change does not deprive its partners of standing to prosecute, and that the accused’s failure to rebut the statutory presumption of liability is fatal to his defence.
What This Means For Similar Cases
Partnership Name Changes Do Not Invalidate Standing
- Practitioners must now argue that a change in trade name of a partnership firm, if accompanied by continuity of partners and business, does not affect the right to initiate proceedings under Section 138 NI Act
- Always produce the partnership deed to establish continuity of identity, even if the firm name has changed
- Do not assume that a name change creates a new legal entity - partners remain the same under law
Burden of Rebuttal Is On the Accused
- The accused must present credible, documentary evidence to rebut the presumption under Section 138 NI Act
- Mere allegations of settlement, coercion, or misuse without supporting documents will be dismissed as speculative
- Courts will not entertain claims of prior compromise unless evidenced by written agreement or acknowledgment
Misuse Allegations Require Prompt Action
- Failure to file a stop memo or criminal complaint for alleged cheque misuse undermines credibility
- Delayed assertions of fraud are treated as afterthoughts and will not override established presumptions
- Practitioners should advise clients to act immediately if they suspect cheque misuse, to preserve legal rights
