Point of Law: As per Section 138 of the N.I.Act, only the payee or holder-in-due course is authorized to file a complaint and the petitioners are neither payee, as seen from the cheque, nor the holders-in-due course.

ORDER :

1. This petition is filed to quash the proceedings against these petitioners/A1 and A2 in CC No.206 of 2015 on the file of the III Special Magistrate Court, Erramanzil. The petitioners are being prosecuted by the 2nd respondent for the offence under Section 138 of the Negotiable Instruments Act.

2. The case of the 2nd respondent is that an amount of Rs.75,00,000/- was given to the accused/petitioners as loan and towards repayment the petitioners issued a cheque bearing No.180902 for Rs.75.00 lakhs. The said cheque was returned unpaid for the reason of ‘payment stopped by the drawer’. Aggrieved by the return of the cheque, a notice was issued. Since the payment covered by the cheque was not paid within the statutory period, after issuing legal notice, the complainant filed the present case.

3. Learned counsel for the petitioners submits that the respondent/complainant is prosecuting the case in his individual capacity. Even according to the complaint, the amount was given from the account of M/s.I.K. Distilleries Private Limited and the cheque was issued in favour of M/s. I.K. Distilleries Private Limited. Prosecuting the petitioners by the complainant in his individual capacity is contrary to the provisions under Section 138 of the Negotiable Instruments Act. As per Section 138 of the N.I.Act, only the payee or holder-in-due course is authorized to file a complaint and the petitioners are neither payee, as seen from the cheque, nor the holders-in-due course. Further, the complainant has failed to file any authorization which was issued in his favour by M/s.I.K. Distilleries Private Limited to prosecute the said case. The cognizance taken by the learned Magistrate is bad in law in view of the bar under Section 142 of the N.I.Act, which prohibits taking cognizance of an offence unless there is authorization given on behalf of the complainant. In support of his contention, he relied on the judgment of this Court reported in the case of Duncan Industries Limited v. T.G.Srinivas, [2015 (1) ALT (CRI.) (A.P) 36 (S.B)]. In the said judgment, it was held that since the power of attorney holder was neither party to the transaction or witness and further no material was placed to show that the authorization given in favour of P.W.1 was valid, in the said circumstances, the appeal against acquittal was dismissed.

4. It is not in dispute that the amount was paid through account of M/s.I.K. Distilleries Private Limited to the 2nd respondent. The cheque was also issued in favour of M/s. I.K. Distilleries Private Limited. The company is a legal entity and any prosecution before a Court shall be by a person duly authorized by the said company.

5. In the cause title, 2nd respondent has described himself as the Director of M/s.I.K. Distilleries Private Limited. However, as seen from the documents appended to the complaint, no authorization of M/s.I.K. Distilleries Private Limited is filed.

6. The subject cheque was issued in favour of M/s.I.K. Distilleries Private Limited and admittedly, the complainant is one of the Directors of M/s.I.K. Distilleries Private Limited.

7. The Hon’ble Supreme Court in the Judgment of M.M. T.C. Limited and another v. Medchl Chemicals and Pharma (P) Limited, [(2002) 1 Supreme Court Cases 234] held that though initially there was no authority to represent the company still a company can at any stage rectify the defect. A company at subsequent stage can send a person who is competent to represent the company. The Hon’ble Supreme Court at para 12 of the Judgment held as follows:

“12…. 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