DATE OF JUDGEMENT
November 10, 2021
BENCH
Justice Sanjay Kishan Kaul
Justice MM Sundersh
PARTIES:
Appellant- Bhupesh Rathod
Respondent- Dayashankar Prasad Chaurasia & Anr.
SUBJECT
Section 138 of the Negotiable Instruments Act which deals with dishonor of cheques and its punishment cannot be rejected just because the Managing Director's name appears first, followed by the company's name.
LEGAL PROVISIONS
Section 138, 139, 118, 142 of the Negotiable Instruments Act.
OVERVIEW
- The respondent, Dayashankar Chaurasia, issued 8 cheques of 20,000/- each in favor of the company M/s. Bell Marshall Telesystems Limited. All of the cheques got dishonoured when presented together for payment on the account of “funds insufficient” on 12.05.2006.
- After the legal notice was issued on 26.05.2006 under Section 138(b) of the Negotiable Instruments act (NI Act) and the demand was not met within 15 days of the notice and neither was any reply received, a complaint was filed on 7.07.2006 by Mr. Bhupesh Rathod (Appellant) before the Metropolitan Magistrate, Mumbai.
- This complaint was accompanied by a Board resolution of the Company dated 17.05.2006 which authorized Mr. Bhupesh Rathod to initiate legal action against the respondent on behalf of the Company. On 24.12.2007, an affidavit was filed by the company which stated that it authorizes him to file a complaint case against the respondent through the above mentioned Board resolution.
- The respondent objected to the complaint claiming that the complaint was filed in the personal capacity of Mr. Bhupesh and not on behalf of the company. Whereas the appellant contended that the cause title of the complaint described Mr. Bhupesh as the Managing Director and therefore the complaint was in the name of the company. To which it was said by the respondents that only the title of the complaint described the complainant as the Managing Director but it is not mentioned on the body of the complaint.
- The trial court acquitted the respondents on the grounds that there was no document except the promissory note signed by the respondent to show that the loan was being granted; and the Board Resolution itself was not signed by the Board of Directors.
- The appellant preferred an appeal to the High Court which was dismissed by an impugned order on 03.08.2015. It was reasoned that it could not be said that the complaint had been filed by a payee or holder in due course as mandated under Section 142(a) of the NI Act. The payee was the Company and not the appellant who had described himself as the Managing Director only in the cause title of the complaint.
ISSUES
Whether the complaint was filed on the behalf of the company if it mentions the Managing Director’s name first?
JUDGEMENT ANALYSIS
- The Supreme Court noted that the respondents have not disputed his signatures on the cheques.
- The court referred to the precedent in Associated Cement Co. Ltd. v. Keshavanand, (2002) 1 SCC 234 to elaborate on the governing principles in respect of a corporate entity which seeks to file the complaint.The body corporate is a de jure complainant while the human being is a de facto complainant to represent the former in the court proceedings.
- The apex court held that after looking at the format of the complaint, it is quite apparent that the Managing Director has filed the complaint on behalf of the company. The court said that “there cannot be a fundamental defect merely because the name of the Managing Director is stated first followed by the post held in the company.”
- The court noted that a copy of board resolution was filed along with the complaint and an affidavit was brought on record in the trial court which affirmed the authority in favor of the Managing Director. A Managing Director of a company in in charge of the affairs of the company for its day-to-day management and approaching the court either under civil or criminal law for setting the trial in motion is an act that comes under his duties.
- On the verification of authorization, the court said that it would be too technical a view to take to defeat the complaint merely because the body of complaint does not elaborate upon the authorization. The company is an artificial person and it has to act through a person/ official which would obviously be chairman or Managing Director.
- The authorization given by the boards members was a copy and does not need to be signed as that would form a part of the minutes of the Board meeting and not a true copy of the authorization.
- The court held that it has been wrongly concluded by the lower courts that the Managing Director was not authorized as by perusing the resolution, it is clear that Mr. Bhupesh Rathod / Sashikan Ganekar were authorised to appoint advocates, issue notices through advocate, file complaint, verifications on oath, appoint Constituent attorney to file complaint in the court and attend all such affairs which may be needed in the process of legal actions.
- The court held that the description of the complainant with its fully registered office address is given at the inception and the only difference is that the Managing Director’s name appears first as acting on behalf of the Company.
- The court accepted that the affidavit and the cross-examination in respect of the same during trial supports the finding that the complaint had been filed by the Managing Director on behalf of the Company. “Thus, the format itself cannot be said to be defective though it may not be perfect.”
- The court was of the view that this technical objection was raised by the respondents to evade his liability.
- The finding reached was that “the complaint was properly instituted and the respondent failed to disclose why he did not meet the financial liability arising to a payee, who is a holder of a cheque in due course.”
- The court reversed the judgements of HC and the Magistrate and held that the respondent was liable to be convicted for the offence under Section 138 NI Act. The court gave a sentence of imprisonment for the term of one year and fine of Rs. 3,20,000/- or keeping in mind the passage of time,if the respondent could pay a sum of Rs. 1, 60,000/-, then the sentence would stand suspended.
CONCLUSION
In conclusion, this judgement specified that just because the format of filing the complaint under Section 138 of the NI Act is not perfect, it cannot be said to be defective. The Managing Director of the company was properly authorized to file the complaint and he was acting on behalf of the Company.
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