INTRODUCTION
Today, I will talk about the case of Bhupesh
Rathod v. Dayashankar Prasad Chaurasia & Another, Criminal Appeal
No. 1105 of 2021, wherein the Hon’ble Supreme Court discussed the manner in
which a Company could institute a Complaint under S. 138 of the NI Act in
relation to dishonour of cheque.
RELEVANT LEGAL PROVISIONS
Before adverting any further, let us understand
the relevant provisions of the Negotiable Instruments Act, 1881.
a. S. 138 of the NI Act provides for the
stipulations to be followed in case there is a dishonour of a Cheque that has
been issued for the discharge of a legally enforceable debt or other such liability.
b. S. 139 of the NI Act provides that “unless
the contrary is proved, it shall be presumed that the holder of the cheque
received the cheque of the nature referred to in Section 138 for the discharge”
of liability.
c. S. 118 of the NI Act also makes a presumption
that a holder of a negotiable instrument is also a holder in due course. S.9 of
the NI Act states that a Holder in due course means any person who for
consideration becomes the possessor of a negotiable instrument before the
amount mentioned in it becomes payable and has no cause to suspect the
authenticity of such negotiable instrument. And
d. S. 142(1)(a) of the NI Act provides that the
complaint must be made either by the payee or the holder in due course. S.7 of
the NI Act provides that a Payee is a person named in the negotiable instrument
to whom the money is by the instrument directed to be paid.
In order to understand who could institute a
complaint on behalf of a Company under S. 138 of the NI Act, let us go through
the pertinent observations by the Court.
OBSERVATIONS BY THE COURT
Firstly, the Court observed that “if a
complaint was made in the name of the Company, it is necessary that a natural
person represents such juristic person in the court and the court looks upon
the natural person for all practical purposes.”
Secondly, the Court noted that body corporates are
de jure complainants while the human beings are de facto
complainants to represent the former in the court proceedings. “Thus, no
Magistrate could insist that the particular person whose statement was taken on
oath alone can continue to represent the Company till the end of the
proceedings. Not only that, even if there was initially no authority the
Company can at any stage rectify that defect by sending a competent person.”
Thirdly, the Court also opined that “a
manager or a Managing Director ordinarily by the very nomenclature can be taken
to be the person in-charge of the company affairs for its day-to-day
management” and usually has the power to take decisions in relation to
institution of judicial proceedings before the Court.
And lastly, based upon the above-stated
understanding of law, the Court explained that “it would be too technical
a view to take to defeat the complaint merely because the body of the complaint
does not elaborate upon the authorisation. The artificial person being the
Company had to act through a person/official, which logically would include the
Chairman or Managing Director. Only the existence of authorisation could be
verified.”
SUMMARY AND CONCLUSION
Thus, in conclusion, when a Complaint is being
instituted by a Company, following formalities are important: -
a. A natural person represents a Company before
the Court.
b. It is the discretion of the Company to choose a
person of their choice to represent them in the Court proceedings.
c. The existence of authorization by the Company
in favour of its representative could be verified by the Court. And
d. There is no need to elaborate on the
authorization of the representative in the Complaint itself.
Therefore, I hope that the manner in which a
Company could institute a Complaint under S. 138 of the NI Act is clear by now.
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