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The High Court of Allahabad, through its judgment dated 19.11.2025 in Sonali Verma and Another v. State of U.P. and Others1, held that proceedings under Sections 138 and 141 of the Negotiable Instruments Act, 1881 ("NI Act") cannot be quashed merely on the ground that the accused partners were sleeping partners of a partnership firm and were not signatories to the cheques.
The High Court held that a partnership firm is not a distinct legal entity and can have a legal persona only when the partnership firm is considered along with its partners. Further, it was noted that when the offence is committed by such a firm, the offence is committed by the partners of the firm and not just the firm per se, and that the partners are personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm.
The High Court, placing reliance on Section 25 of the Partnership Act, 1932 held that the sleeping partners cannot escape liability merely by designating themselves as sleeping partners or delegating authority through a power of attorney.
Footnote
1 Application u/s 482 No. 8942 of 2025.
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