2006(1) Bankmann 515
SUPREME COURT OF INDIA
K.T. Thomas & S.N. Variava, JJ.
M.M.T.C. Ltd & Anr. — Appellants
versus
Medchl Chemicals and Pharma (P) Ltd. & Anr. — Respondents
Criminal Appeal Nos. 1173-1174 of 2001
Decided on 19-11-2001

IMPORTANT POINT
In a complaint under Section 138 Negotiable Instruments Act by company, payee of cheque even presuming that initially there was no authority of a person who presented the complaint, company at any stage rectify that defect and send a person who was competent to represent the company and complaint could not be quashed on that ground.

Headnote:Negotiable Instruments Act, 1881—Sections 138 and 142—Dishonour of cheque—Complaint can be made by payee or holder in due course of said cheque—Appellant Complainant company was payee of cheques in question and complaint was filed by the Manager of Regional Office of appellant—At subsequent stage the Deputy General Manager of appellant was allowed to represent the appellant—In the quashing petition High Court held that only an Executive Director of Company had the authority to institute legal proceedings and further held that authorization must be on date when complaint was filed and subsequent authorization did not validate complaint—It was held that absence of a complaint by a duly delegated authority was not a mere defect or irregularity which could be cured subsequently—Whether view of High Court was correct? No.

       Held: In the impugned judgment it has been held that the complaints filed by Mr. Lakshman Goel were not maintainable. It was noticed that in those two complaints, at a subsequent stage, one Mr. Sampath Kumar, the Deputy General Manager of the appellant was allowed to represent the appellants. The High Court held that it is only an Executive Director of the Company who has the authority to institute legal proceedings. It is held that the complaint could only be filed by a person who is incharge of or was responsible to the company. It is held that authorization must be on the date when the complaint is filed and subsequent authorization does not validate the complaint. It is held that the absence of a complaint by a duly delegated authority is not a mere defect or irregularity which could be cured subsequently. It is held that if the record does disclose any authorization, then taking cognizance of the complaint was barred by Section 142(a) of the Negotiable Instruments Act. It has been held that Senior Manager (who had lodged the complaints) and the Deputy General Manager (who was substituted) had not been authorized by the Board of Directors to sign and file the complaint on behalf of the company or to prosecute the same. It is held that the Manager or the Deputy General Manager were mere paid employees of the company. (Para 7)

       In the case of Associated Cement Co. Ltd. v. Keshvanand, reported in 1998(1) SCC 687, it has been held by this Court that the complainant has to be a corporeal person who is capable of making a physical appearance in the Court. It has been held that if a complaint is made in the name of a incorporeal person (like a company or Corporation) it is necessary that a natural person represents such juristic person in the Court. It is held that the Court looks upon the natural person to be the complainant for all practical purposes. It is held that when the complainant is a body corporate it is the de jure complainant, and it must necessarily associate a human being as de facto complainant to represent the former in Court proceedings. It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission of the Court for sending any other person to represent the company in the Court. Thus, 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 this ground. (Para 10)

       (ii) Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Section 482—Quashing of complaint for offence of dishonour of cheque on a finding that cheques were issued as security and not for any debt or liability existing on the day they were issued—High Court was not justified in embarking upon an inquiry as to reliability or genuineness of allegations—Impugned order was liable to be set aside. (Para 11)

       (iii) Negotiable Instruments Act, 1881—Section 138—Dishonour of cheque with endorsement “payment stopped”—By virtue of Section 139 of the Act Court has to presume that cheque was received in whole or in part of any debt or liability though it was rebuttable presumption—Complaint could not be quashed on that ground.

       Held: Lastly it was submitted that a complaint under Section 138 could only be maintained if the cheque was dishonored for reason of funds being insufficient to honour the cheque or if the amount of the cheque exceeds the amount in the account. It is submitted that as payment of the cheques had been stopped by the drawer one of the ingredients of Section 138 was not fulfilled and thus the complaints were not maintainable. Just such a contention has been negatived by this Court has, in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi, reported in 1998(3) SCC 249. It has been held that even though the cheque is dishonoured by reason of ‘stop payment’ instruction an offence under Section 138 could still be made out. It is held that the presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop payment instructions by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the “stop payment” instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there was sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer Bank and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. Thus a Court cannot quash a complaint on this ground. (Paras 16 and 17)