Sarathi Leasing Finance Limited vs Sri B. Narayana Shetty on 16 February, 2006 [II (2007) BC 1, 2006 131 CompCas 798 Kar]

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FACTS OF THE CASE

This is a revision petition, which is directed against the judgment passed by the Additional Sessions Judge, for the offence punishable under Section 138 of the Negotiable Instruments Act. The revision petitioner/complainant prays for resorting to the conviction and sentence imposed by the Learned Trial Judge.

The revision petitioner is a company filed Managing Director on behalf of the Company. It was alleged that a person named Vasanthkumar had borrowed a sum of Rs. 65,000/- from the revision petitioner.For repayment of the balance of the said amount with interest, Sri B. Narayana Shetty ,as co-obligant, had issued a cheque for Rs. 65,200/-. The said cheque was dishonoured when it was presented for encashment. The complainant/company claimed that despite service of notice of dishonour of cheque, the respondent failed to pay the amount, the latter had committed an offence punishable under Section 138 of the Negotiable Instruments Act. A contention was taken on behalf of the respondent/accused in the Trial Court that though his signature was on the cheque, contents of the cheque had not been filled by him and that he had not stood surety for repayment of any loan taken by Vasanthkumar.

ISSUES OF THE CASE

  • Whether the person filing a complaint on behalf of the company had the authorization to file the suit?
  • Whether the contention raised by the respondent that though his signature was on the cheque, contents of the cheque had not been filled by him and that he had not stood surety for repayment of any loan taken by Vasanthkumar is maintainable?

RULE OF LAW

Section 138 of Negotiable Instruments Act 1881

Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 19 [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Section 142 of Negotiable Instruments Act 1881

Also Read  Official Liquidator v. Sri Krishna Deo (1959) 29 Com Cases 476: AIR 1959 All 247

Cognizance of offences. —Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)—

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

ANALYSIS

A contention was taken on behalf of the respondent/accused in the Trial Court that though his signature was on the cheque, contents of the cheque had not been filled by him and that he had not stood surety for repayment of any loan taken by Vasanthkumar. Since the ingredient of the offence under Section 138 of the Negotiable Instruments Act having been disclosed, the accused/respondent was liable to be convicted of the offence punishable under Section 138 of the Negotiable Instruments Act. Consequently, he convicted the respondent and imposed a sentence of simple imprisonment for 3 months and a fine of Rs. 500/- in default to undergo simple imprisonment for one month. It was further directed that if the fine amount was realized, an amount of Rs. 80,000/- be paid to the complainant as compensation.

That judgment of conviction and sentence was challenged by the respondent. In effect his contention was that the said Vasanthkumar had stolen the cheque and had given it to the complainant.

There was another contention taken by the respondent. It was that there was no proper authorization by the company empowering the Managing Director to file the complaint and to conduct the case. Since the respondent-Company had been represented by the Managing Director of the Company, the question of authorization did not arise. In the present case, the complaint has been filed by the Managing Director and as per the articles of association, the Managing Director has been empowered by Article 159(15) to represent the Company in legal proceedings.

The only eligibility criterion prescribed by Section 142 for maintaining a complaint under Section 138 is that the complaint must be by the payee or the holder in due course. This criterion is satisfied as the complaint is in the name and on behalf of the appellant Company. Therefore, even presuming that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company. The complaints could thus not have been quashed on that ground. When an artificial person like a Company has to file a complaint, it should be operated through one of its officials which may include even a Chairman or Managing Director.

JUDGEMENT

The Court held, the Question of authorisation to such persons to file the complaint arises only if the accused takes up a specific plea that the company did not intend to prosecute him for the offence or that there is some material before the court to indicate that the complainant-company has no intention to prosecute the accused.

It was held that if the accused has to take up the plea that the person filing and proceeding the case has no such authority to do so, then the accused has to indicate that the complainant/payee has no intention to prosecute the accused. Hence, there is nothing on record to show that the accused had taken a specific plea regarding authorization in the present case.

Also Read  P.A. Verghese and others vs Maa Communications Pvt. Ltd. on 6 February 1997 (ILR 1997 KAR 1747)

Reliance is placed on a decision of the Bombay High Court in the case of Credential Finance Limited v. State of Maharashtra and others, the decisions of the Supreme Court in the cases of Vishwa Mitter v. O.P.Poddar and others, M.M.T.C. Limited and another v. Medchl Chemicals and Pharma (Private) Limited and another, for the proposition that, neither the Negotiable Instruments Act nor the Companies Act imposes a precondition that there has to be an authorization, that too, in the form of a Board Resolution in favour of any person filing a complaint on behalf of the company and that criminal law can be set in motion by any person by filing a complaint and therefore, any officer of a company can file the complaint so long as he have the power to act on behalf of the company and his actions are binding on the company. Further, that the judgments cited by the petitioners’ counsel are either not applicable or do not lay down the correct legal position or are per incuriam and not binding on this Court.

CONCLUSION

Section 138 provides that when the cheque is dishonoured for insufficiency of funds or for any of the prescribed reasons, the one who is at defaulter can be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or both. And section 142 states the court will take cognizance of any offence punishable under section 138 upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque. The criterion prescribed by Section 142 for maintaining a complaint under Section 138 of the Negotiable Instruments Act is that the complaint must be by the payee or the holder in due course.

In the above case, the complaint was filed by the Managing Director on behalf of the company. Therefore, the said criteria are automatically satisfied. Even if presuming that initially there was no authority, the company can rectify that defect.

It is a well-acknowledged fact that a company is a separate legal entity and an artificial person. Therefore, an artificial person like a Company is operated through its officials which may be Chairman or Managing Director.

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