TRL Krosaki Refractories Ltd Vs Sms Asia Private Limited: Supreme Court Takes Cognizance Of Complaint Filed By Ar’s Is Sufficient For Magistrate To Take Into Consideration

Date of Judgement:
22nd February 2022

Bench:
N.V. Ramana, CJI
A.S. Bopanna, J
Hima Kohli, J

Parties:a
Appellant – M/s TRL Krosaki Refractories Ltd.
Respondent – M/s SMS Asia Private Ltd. & Anr.

Subject

The Apex court in this judgment observed that in a case of cheque bounce, where the complainant is a company, then an authorized agent or employee can represent himself on behalf of the company. Provided that a sworn affidavit has been provided to the court, that shall be sufficient consideration for the Magistrate to take due cognizance.

Legal Provisions

• Section 138 of Negotiable instruments acts,1881- which provide for the dishonor of cheque where a cheque is drawn by the payor in respect to discharging of some debt, liability, loan is given to another person and that due to insufficiency of funds available or amount being exceeded fails to honor the transaction, such persons shall be held liable under this provision.
• Section 142 of Code of Criminal Procedure, 1973 –upon the discretion of the Magistrate is he may so deem fit to prevent injury to the public, then he shall issue a necessary injunction to the person against whom such orders were made to prevent or avert such damage to the matter at hand.
• Section 482 of Code of Criminal Procedure, 1972 - To nullify the Magistrate's order taking cognizance would be unwarranted given the problem of adequate authority and knowledge can only be an issue.

Overview

• The appellant(complainant/payee) upon being aggrieved by the decision taken by High Court of Odisha at Cuttack, upon examination by the hon’ble judges the order dated on 5/11/2015 was quashed which was previously passed by the Sub-Judicial Magistrate by which cognizance was taken and summons were sent to the respondent. Subsequently, the appellant petitioned Supreme Court to begin aggrieved by the above judgment by the High Court of Odisha.
• The respondent in the present case issued seven cheques in favor of the appellant dated 13/03/2015, all amounting to Rs.1,10,00,000/- (Rupees one crore ten lakhs), upon presentation of the respective cheques in the bank, the bank reverted the endorsement with the statement that, the accounts are closed, following which the appellant sent legal notices via a post on 14/04/2015, but the respondents failed to reply to the same, in that view the appellant filed a complaint before the Sub-Judicial Magistrate(SDJM) U/s 138 and 142 of the Negotiable Instruments Act, 1881.Upon being satisfied by the material facts and sworn affidavits the same was acknowledged by the learned Judge and summons were sent to the respondent(accused) on 05/11/2015.
• In response to the summons sent to the respondents(accused) filed a petition U/s 482 of the Code of Criminal Procedure(Cr.P.C) before the High court claiming that the SDJM had taken due cognizance of the matter even though the complaint was filed by an incompetent and unknown person to the transaction, and the alleged person(Mr. Subhasis ku. Das),General Manager, has no knowledge about the alleged transaction andhad not witnessed the same in his presence.
• The High Court acknowledging the contention put forth by the learned counsels for respondents and citing the case of A.C. Narayanan v. State of Maharashtra & Anr., concluded that there was no mention ofthe authorization given to the complainant(Mr. Subhasis ku. Das),General Manager, to represent the company in the above matter. It was also observed that no authorization by the Board of Directors of the complainant and nor any letter issued by the Managing directors was attested for the perusal of the concerned Magistrate of sub delegating his authority to the General Manager to represent on behalf of the company.
• Further, contentions made by the learned counsel for the appellant that the High Court has misconstrued the principled stated in the A.C. Narayanan case and even after the requirements being stated and also the power of attorney being executed by one individual to the other to conduct the case on behalf of the company, the High court did not duly appreciate the facts of the case as there exists sufficient materials for the court to acknowledge the same and that the learned Magistrate being satisfied that there exists sufficient material for perusal of the proceedings had issued the summons, also the agreement entered into by the appellant company and the respondents, Mr. Subhasis Kumar(General Manager) was a present witness of the same and had duly signed the documents, furthermore the complainant also signed the legal notice sent to the respondents upon dishonor of the cheques, thus stating that the company was being represented by a competent person who had sufficient knowledge about the transaction.
• Subsequent pleadings made by ld. Counsels of the respondents seek to maintain the judgment passed by the Hon’ble Court because, the court duly appreciated the statements that there should exist explicit authorization to the effect that the person who is filing the complaint is duly authorized by the complainant and has sufficient knowledge of the alleged transaction, subsequently relying on the judgment in A.C. Narayanan(supra), therefore such contention would not call for interference in this appeal by ld. Counsels for appellant.

Issues

• Whether the judgment passed by the High Court of Odisha vide 14/12/2017 was justified or not?
• Whether the complaints filed U/s 138 of the Negotiable Instruments Act is per the requirement U/s 142 of the N.I. Act.?

Judgment

• In the case of M/s. M.M.T.C. Ltd v. Medchi Chemicals and Pharma (P) Ltd., which had taken note of an earlier decision taken by the Hon’ble court in the case of Vishwa Mitter v. O.P. Poddar, where it was decided that anyone with sufficient relation to the case can file a criminal motion by filing a complaint in the court of apt jurisdiction before a Magistrate entitled to take cognizance of the matter. The only apt requirement for eligibility was set out that the complaint must be filed by the payee or the holder of the cheque.
• But in a subsequent judgment in the case of Janaki Vashdeo Bhojwani & Anr. V. IndusInd Bank Ltd. & Ors., considering the provisions contained in Order III Rule 1 and 2 of CPC, the principal alone cannot be said to be entitled to cross-examination.
• The court also observed, after examining the decision given by the bench in the case of A.C. Narayanan(supra), and after references to the questions posed by the then bench of learned judges, the Hon’ble court explained that the “it is upon the discretion of the Magistrate to initiate the proceedings based on the content of the complaint made before him and all the documents attested for the court’s perusal with respect to the complaint made”.
• Thus, stating that power-of-attorney holder may be allowed to be filed for the initiation of the suit under section 138 of the N.I. Act. However, posing an exception that if the complainant does not know about the alleged transaction he may not be allowed to be examined.
• Also, it is required of the complainant that asserts adequate emphasis upon the knowledge that power of attorney is explicitly mentioned in the complaint filed, additionally the power of attorney can’t be transferred to some other person without any valid reason, and if transferred knowingly then the complaint shall not be cross-examined by the Magistrate concerning the complaint filed.
• Furthermore, the Hon’ble Supreme Court analyzed the judgment passed by the High Court of Odisha concerning ‘nonsuiting’ the appeal made by the complaint due to lack of averments in the complaint as to whether Mr. Subhasis Kumar Das(General Manager) had any knowledge about the alleged transaction.Thedocuments(agreement) submitted by the appellant included signatures of the executives and the witnesses in which Mr. Subhasis Kumar Das(General Manager) signatures were present and also in the reconciliation notices which were sent by the appellant company upon the dishonor of the cheques issued, this indicated the facts that the complainant had complete knowledge about the alleged transactions and was a witness to the same being brought into force.
• The Hon’ble Supreme Court took due considerations of the material fact that an authorized person, being a witness to the alleged transaction and having sufficient knowledge of the same was sufficient as per the requirements stated out in the Sec.142 of the N.I. Act.
• The Hon’ble Court also referred to the case of Samrat Shipping Co. Pvt. Ltd. Vs. Dolly George., in which the court especially emphasized on the evidence at the learned judge’s disposal to ascertain whether the complainant had sufficient authority and is a party to the alleged transaction, and in respect of proving the same to the Trial Court a fair opportunity shall be given to the complainant, and subsequently, the Hon’ble Court set aside the dismissal and ordered a fresh trial to commence at a suitable date.
• As, per the requirements U/s 142 it only requires that the complaint should be filed by the name of the payee, and in case of the complainant being a company or a corporate body the company can be represented by the concerned employee or even by a non-employee if authorized and empowered to represent the company by power of attorney or by a passage of a resolution by the Board of Members.
• Additionally, in entertaining a petition U/s. 482 to dismiss the order taking due cognizance of the complaint would be unjustified because all necessary averments and material are sufficient for the learned Magistrate to take cognizance and institute a law full proceeding concerning the complaint.
• Conclusively, the Hon’ble Supreme Court set aside the judgment passed by the High Court of Odisha vide 14/12/2017 andordered to reinstitute the proceedings in the Trial court of Jharsuguda, thus the court allowed the appeal with cost settled at Rs. 1,00,000/(Rupees one lakh only) and disposed of all pending applications.

Conclusion

The issue of proper authorization is an issue for trial, and the complaint cannot be dismissed on that ground under section 482 of the CrPC because it would be grossly unjustified to the complainant; the failure to pursue the appeal would result in the courts failing to account for the material evidence provided by the complainant, andit would be unjust to the complainant that the court set aside the complaint before appreciating the averred documents containing sworn affidavit submitted by the payee with respect the alleged transaction.

Thus, to account for the same the Hon’ble Supreme Court has observed that “All that is necessary is to demonstrate before the learned Magistrate that the complaint filed is in the name of the payee, the authorization thereof and that the contents of the complaint/payee is a company, and an authorized employee can represent the company. And such averment and prima facie material are sufficient for the learned Magistrate to take cognizance and issue process.”

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