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2025 Supreme(Guj) 2203
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J. C. DOSHI, J.
Champion Agro Ltd., Thro' Dhirajbhai Ghusabhai Hirpara & Ors. - Applicants
Versus
Kotak Mahindra Bank Ltd. Thro' Authorised Officer & Ors. – Respondents
R/Special Criminal Application (Quashing) No. 1723 of 2017 With R/Special Criminal Application No. 1726 of 2017
Decided On : 30-09-2025
Advocates Appeared :
For the Applicant : Mr Vishwas K. Shah
For the Respondents : Mr Anand B. Gogia, Mr BB Gogia, Mr. Vivek B. Gupta, Ms Muskan A. Gogia, Mr. Chintan Dave, APP
For the Appellants/Petitioners: Dhirajbhai Ghusabhai Hirpara
For the Respondents: N/A
A juristic entity can validly pursue legal proceedings under the Negotiable Instruments Act post-assignment of debt without needing representation by a natural person.
Headnote:(A) Negotiable Instruments Act, 1881 - Section 138 - Criminal Procedure Code, 1973 - Sections 482, 216, and 217 - Substitution of complainant - Legality and validity of substitution challenged - Court clarified that substitution of a bank as a complainant is valid upon assignment of debt, allowing the bank to continue legal proceedings - Personal knowledge of original complainant is not necessary for the substituted complainant to pursue matters based on authoritative documents. (Paras 9-20)
(B) Crime - Right to prosecute - Juristic entities can lawfully appear through authorized representatives and do not require a natural person to be impleaded as complainant - Complainants must have authorization and knowledge of the case, as held in cited Supreme Court cases providing pertinent guidance. (Paras 9-20)
Facts of the case:
The case involves a company and its directors accused under Section 138 for dishonoring a cheque issued towards a loan arranged through a finance company, where post-assignment of the complaint to a bank, the petitioners contested the legitimacy of the bank’s claim.
Findings of Court:
The Court upheld the trial court's decision to permit substitution, affirming the procedural legitimacy of such actions in light of contractual agreements.
Issues: The primary issues pertained to the validity of the substitution of the complainant and the rights of the accused regarding personal testimonies in the complaint proceedings.
Ratio Decidendi: The court ruled that a juristic entity, as per the contract, holds the right to substitute in the proceedings and does not preclude the personal rights of the accused as established in previous judgments.
Result: Dismissed.
| Table of Content |
|---|
| 1. introduction to simultaneous complaints and issues of substitution. (Para 1 , 3 , 4) |
| 2. petitioners argue the substitution is prejudicial to legal rights. (Para 5) |
| 3. respondents defend legality of substitution based on assignment. (Para 6) |
| 4. court examines legal principles around substitution of complainant. (Para 8 , 9 , 10 , 12 , 13) |
| 5. court's final rationale on the validity of complaints by juristic entities. (Para 17 , 18 , 19) |
JUDGMENT :
J. C. Doshi, J.
1. The captioned petitions, involving identical questions of law and fact inter se between the same parties, albeit arising out of two distinct criminal complaints, are, with the consent of learned counsel appearing on either side, heard analogously and are being disposed of by this common order.
2. At the request of the learned advocates for both parties, Special Criminal Application No. 1723 of 2017 is treated as the lead matter for the purpose of adverting to and extracting the relevant factual matrix.
3. Both petitions have been instituted by the accused persons invoking jurisdiction of this Court under Section 482 of the Code, assailing the legality, validity, and propriety of the order passed by the learned Trial Court whereby Kotak Mahindra Bank Ltd. (hereinafter referred to as ‘the bank’) has been permitted to be substituted in place of original complainant- Capital First Ltd., consequent upon the assignment of business in favour of the said Kotak Mahindra Bank Ltd. in proceedings arising under Section 138 of the Negotiable Instruments Act, 1881 (for short, “the NI Act”).
BRIEF FACTS OF THE CASE:-
4. The Petitioner No.1 is a Company incorporated under the Companies Act, 1956, while Petitioners No.2 to 4 are its Directors. It is the case of Respondent No.2, a Non-Banking Finance Company duly registered with the Reserve Bank of India, that the Petitioner No.1 availed financial assistance of Rs.5,48,00,000/-, for which Petitioners No.2 to 4 allegedly stood guarantors. Towards part discharge of the said liability, a cheque bearing No.026353 dated 11.12.2014 drawn on Axis Bank, Rajkot, was issued, purportedly signed by Petitioner No.2 as the authorised signatory of the Company. The said cheque, when presented for encashment, came to be dishonoured with the endorsement "Account Block". Consequently, Respondent No.2 issued statutory notice dated 17.12.2014 and thereafter instituted Criminal Complaint No.895 of 2015 before the Court of the Ld. Chief Judicial Magistrate, Rajkot, under Section 138 of the NI Act.
4.1. During the pendency of the said complaint, Respondent No.2, without notice to the Petitioners, executed a registered Deed of Assignment dated 28.12.2015 (registered on 21.04.2016), thereby assigning the alleged debt in favour of Respondent No.1 Bank. Pursuant thereto, Respondent No.1 moved an application dated 19.08.2016 before the Ld. Chief Judicial Magistrate seeking substitution of its name in place of Respondent No.2 in Criminal Complaint No.895 of 2015. Despite the Petitioners’ objections, the Ld. Magistrate, vide order dated 17.01.2017, allowed such substitution, which order is impugned in the present proceedings.
4.2. Identical facts are stated for another criminal case, where, except for the serial number of the cheque, all other aspects remain the same. In the second criminal case, the serial number of the cheque is 026356.
SUBMISSION OF THE PETITIONER:-
5. Learned counsel appearing for the petitioners has vehemently contended that the Court below has fallen into manifest error in permitting substitution of the complainant, which, according to him, has gravely prejudiced the rights of the accused. It is urged that the petitioners, being the accused, possess a legitimate right to question the personal knowledge of the original complainant with respect to the underlying transaction between the parties. However, the substitution of the Bank in place of the erstwhile complainant, Capital First Ltd., has effectively divested the accused of their right
