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Bhupesh Rathod vs. Dayashankar Prasad Chaurasia and Ors. - (Supreme Court) (10 Nov 2021)

Complaint filed on behalf of a company under Section 138 of the NI Act not to be dismissed merely for reason that it stated the name of Managing Director first followed by Company's name



The case made out in the complaint is that, a sum of Rs.1,60,000 was advanced to the Respondent by the Company and the cheques were issued to repay the loan. The Respondent took an objection that, the complaint was filed in the personal capacity of Bhupesh Rathod and not on behalf of the Company. While on the other hand, it was contended by the Appellant that the complaint was in the name of the Company and in the cause title of the complaint, he had described himself as the Managing Director.

The trial Court acquitted the respondent based on a dual reasoning – (a) there was no document except the promissory note signed by the respondent to show that the loan was being granted; and (b) the Board Resolution itself was not signed by the Board of Directors. The appellant preferred an appeal before the High Court. The High Court by the impugned order dismissed the appeal.

The words of Section 139 of the Negotiable Instruments Act, 1881 ( NI Act) are clear 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, in whole or in part, of any debt or other liability. The Respondent has not set up a case that, the nature of transaction was of the nature which fell beyond the scope of Section 138. Other than taking a technical objection, really nothing has been said on the substantive aspect. The only eligibility criteria prescribed under Section 142(1)(a) of NI Act is that, the complaint must be by the payee or the holder in due course.

The Managing Director has filed the complaint on behalf of the Company. There could be a format where the Company’s name is described first, suing through the Managing Director but there cannot be a fundamental defect merely because the name of the Managing Director is stated first followed by the post held in the Company. It is also relevant to note that a copy of the Board Resolution was filed along with the complaint. An affidavit had been brought on record in the trial court by the Company, affirming to the factum of authorisation in favour of the Managing Director.

A Manager or a Managing Director ordinarily by the very nomenclature can be taken to be the person in-charge of the affairs Company for its day-to-day management and within the activity would certainly be calling the act of approaching the court either under civil law or criminal law for setting the trial in motion. 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.

The description of the complainant with its full registered office address is given at the inception itself except that the Managing Director’s name appears first as acting on behalf of the Company. The affidavit and the cross-examination supports the finding that, the complaint had been filed by the Managing Director on behalf of the Company. Thus, the format itself cannot be said to be defective though it may not be perfect.

The signatures on the cheques were not denied. Neither was it explained by way of an alternative story as to why the duly signed cheques were handed over to the Company. There was no plea of any fraud or misrepresentation. The complaint was properly instituted and the Respondent failed to disclose why he did not meet the financial liability arising to a payee, who is a holder of a cheque in due course. The complaint was instituted in July, 2006. Fifteen years have elapsed since then. In view of passage of time, if the Respondent pays a further sum of Rs.1,60,000 to the appellant, then the sentence would stand suspended. Appeal allowed.


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