BHUPESH RATHOD versus DAYASHANKAR PRASAD CHAURASIA & ANR. on 10 November 2021

[2021] 7 S.C.R. 319

BHUPESH RATHOD

v.

DAYASHANKAR PRASAD CHAURASIA & ANR.

(Criminal Appeal No. 1105 of 2021)

NOVEMBER 10, 2021

[SANJAY KISHAN KAUL AND M. M. SUNDRESH, JJ.]

Negotiable Instruments Act, 1881: ss.138, 142 – Complaintfiled u/s.138 by the Managing Director of the appellant-company –Board Resolution authorising the Managing Director to filecomplaint for dishonour of cheque annexed with the complaint –Defence of respondent that the complaint was not in proper form asthe complaint and the Board Resolution annexed did not lead toconclusion that it was filed on behalf of the Company – Held: It isquite apparent from the format of the complaint that the ManagingDirector had filed the complaint on behalf of the Company – Therecould be a format where the Company’s name is described first,suing through the Managing Director but there cannot be afundamental defect merely because the name of the ManagingDirector is stated first followed by the post held in the Company – Itwould be too technical a view to take to defeat the complaint merelybecause the body of the complaint does not elaborate upon theauthorisation – The artificial person being the Company had to actthrough a person/official, which logically would include theChairman or Managing Director – Only the existence ofauthorisation could be verified – Respondent not having disputedhis signatures on the cheques, it was for him to show in whatcircumstances the cheques had been issued, i.e., why was it not acheque issued in due course – There was no plea of any fraud ormisrepresentation – The complaint was properly instituted and therespondent failed to disclose why he did not meet the financialliability arising to a payee, who is a holder of a cheque in duecourse – Complaint was instituted in July, 2006 – In the givenscenario, the respondent should be sentenced with imprisonmentfor a term of one year and with fine twice the amount of the cheque,i.e., Rs.3,20,000/- – However, in view of passage of time, thesentence would stand suspended if he pays a further sum ofRs.1,60,000/- to the appellant.

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320SUPREME COURT REPORTS

AAllowing the appeal, the Court

HELD: 1. The respondent not having disputed hissignatures on the cheques, it was for him to show in whatcircumstances the cheques had been issued, i.e., why was it not acheque issued in due course. The words of Section 139 of the NIBAct are quite clear that unless the contrary is proved, it shall bepresumed that the holder of the cheque received the cheque ofthe nature referred to in Section 138 for the discharge, in wholeor in part, of any debt or other liability. The respondent has notset up a case that the nature of transaction was of the naturewhich fell beyond the scope of Section 138. Other than taking aCtechnical objection, really nothing was said on the substantiveaspect. [Para 17][327-H; 328-A-B]

2. The only eligibility criteria prescribed under Section142(1)(a) is that the complaint must be by the payee or the holderin due course. It is quite apparent from the format of the complaintDthat the Managing Director has filed the complaint on behalf ofthe Company. There could be a format where the Company’s nameis described first, suing through the Managing Director but therecannot be a fundamental defect merely because the name of theManaging Director is stated first followed by the post held in theECompany. [Paras 18, 22][328-B-C; 329-A-B]

Triyambak S. Hegde v. Sripad Crl. Appeal Nos.849-850/2011 decided on 23.09.2021; AssociatedCement Co. Ltd. v. Keshavanand (1998) 1 SCC 687 :[1997] 6 Suppl. SCR 500; M.M.TC Ltd. & Anr. v. MedchlFChemicals and Pharma (P) Ltd. & Anr. (2002) 1 SCC234 : [2001] 5 Suppl. SCR 265; Credential FinanceLtd. v. State of Maharashtra (1998) 3 Mh.L.J. 805 –referred to.

3. A copy of the Board Resolution was filed along with theGcomplaint. An affidavit had been brought on record in the trialcourt by the Company, affirming to the factum of authorisation infavour of the Managing Director. A Manager or a ManagingDirector ordinarily by the very nomenclature can be taken to bethe person in-charge of the affairs of the Company for its day-to- H

day management and within the activity would certainly be callingthe act of approaching the court either under civil law or criminallaw for setting the trial in motion. It would be too technical a viewto take to defeat the complaint merely because the body of thecomplaint does not elaborate upon the authorisation. The artificialperson 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. [Para23][329-B-E]

4. The authorisation in the present case, was a copy and,thus, does not have to be signed by the Board Members, as thatwould form a part of the minutes of the Board meeting and not atrue copy of the authorisation. The authorisation in the form of acertified copy of the Resolution, it states that legal action has tobe taken against the respondent for dishonour of cheques issuedby him to discharge his liabilities to the Company. To this effect,the appellant was authorised to appoint advocates, issues noticesthrough advocate, file complaint, verifications on oath, appointConstituent attorney to file complaint in the court and attend allsuch affairs which may be needed in the process of legal actions.The finding by the Courts below as to the lack of authorisation todepose also, thus, stands nullified. [Para 24, 25][329-E-H]

5. The complaint was properly instituted and the respondentfailed to disclose why he did not meet the financial liability arisingto a payee, who is a holder of a cheque in due course. Thecomplaint was instituted in July, 2006. Fifteen years have elapsedsince then. The punishment prescribed for such an offence underSection 138 of the NI Act is imprisonment for a term which mayextend to two years, or with fine which may extend to twice theamount of the cheque, or with both. In the given scenario therespondent should be sentenced with imprisonment for a term ofone year and with fine twice the amount of the cheque, i.e.,Rs.3,20,000/-. However, in view of passage of time, if therespondent pays a further sum of Rs.1,60,000/- to the appellant,then the sentence would stand suspended. [Paras 28, 29][330-E-H; 331-A]

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ACase Law Reference

[1997] 6 Suppl. SCR 500referred toPara 19[2001] 5 Suppl. SCR 265referred toPara 20(1998) 3 Mh.L.J. 805referred toPara 23

BCRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.1105 of 2021.

From the Judgment and Order dated 03.08.2015 of the High Courtof Judicature at Bombay in Criminal Appeal No.805 of 2009.

Pratap Singh Parmar, Kuldeep Singh Kuchaliya, Mohd. Aarif, AjayCPal, Advs. for the Appellant.

V. K. Sidharthan, Samrat Krishnarao Shinde, Rahul Chitnis, SachinPatil, Aaditya A. Pande, Jeo Joseph, Advs. for the Respondents.

The Judgment of the Court was delivered byDSANJAY KISHAN KAUL, J.

1. Dayashankar Chaurasia, the respondent issued eight (8)cheques of Rs.20,000/- each totalling to Rs.1,60,000/- in favour ofM/s. Bell Marshall Telesystems Limited (for short ‘the Company’). Thecheques were drawn on HDFC Bank, Vasai (E) Branch, Mumbai. TheseEcheques were drawn on different dates but were presented togetherfor payment on 10.05.2006. All the cheques got dishonoured on accountof “funds insufficient” as per Bank Memos issued on 12.05.2006. Onthe cheques being dishonoured, legal notices were issued by thebeneficiary under Section 138(b) of the Negotiable Instruments Act, 1881F(hereinafter referred to as the ‘NI Act’) on 26.05.2006. The demandwas, however not met within fifteen (15) days of the receipt of thenotice nor was any reply sent which resulted in the complaint bearingNo.160/SS/07 being filed on 07.07.2006 by Mr. Bhupesh Rathod beforethe Special Metropolitan Magistrate, Mumbai. The complaint wasaccompanied by a Board Resolution of the Company dated 17.05.2006Gauthorising Mr. Bhupesh Rathod to initiate legal action against therespondent on behalf of the Company. On 24.12.2007, the Companyfiled an affidavit through its Managing Director, i.e., Mr. Bhupesh Rathod,stating that it had authorised him through the abovementioned BoardResolution to file a complaint case against the respondent.

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2. In view of the fact that much turns on the manner of descriptionof the complainant, we reproduce the description of the complainant asunder:

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“Mr. Bhupesh M. Rathod

Managing Director of M/s. BellMarshall Telesystems Ltd.Aged: 41 years, Occupation: BusinessHaving address at 1107, V MakerChamber, Nariman PointMumbai- 400021.”

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3. The Board Resolution passed on 17.05.2006 is in the following terms:

“RESOLVED THAT legal action be initiated against DayashankarDPrasad Choursiya for the dishonour of chqs issued by him and indischarge of this liabilities to the company and Mr. BhupeshRathod/Sashikant Ganekar is hereby authorized to appointadvocates, issues of notices through advocate, file complaint,Verifications on Oath, appoint Constituent attorney to file complaintin the court and attend all such affairs which may be needed inEthe process of legal actions.”

For Bell Marshal Tele Systems LTD.

Sd/-

Dated: 17/05/2006

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Director”

4. We reproduce the aforesaid as the competency and the mannerof filing of the complaint are the primary considerations debated beforeus.

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5. The case made out in the complaint is that a sum ofRs.1,60,000/- was advanced to the respondent by the Company and thecheques were issued to repay the loan. The respondent took an objectionthat the complaint was filed in the personal capacity of Mr. BhupeshRathod and not on behalf of the Company. While on the other hand itwas contended by the appellant that the complaint was in the name of H

Athe Company and in the cause title of the complaint he had describedhimself as the Managing Director. The Company was a registeredcompany under the Companies Act, 1956. The registration certificate,however, was not placed on record. On this aspect, it was the furthersubmission of the respondent that it is only in the aforesaid title descriptionthat the complainant is described as the Managing Director of theBCompany but in the body of the complaint it is not so mentioned.6. The trial court acquitted the respondent on 12.03.2009 basedon a dual reasoning –

(a) there was no document except the promissory note signed byCthe respondent to show that the loan was being granted; and(b) the Board Resolution itself was not signed by the Board ofDirectors (it may be stated that this was really a true copy of theBoard Resolution).

7. The appellant preferred an appeal before the High Court. TheDHigh Court by the impugned order dated 03.08.2015 dismissed the appeal.

8. It may be relevant to note that the High Court traversed manypaths while coming to this conclusion. In a nutshell the reasoning was:

(a) it could not be said that the complaint had been filed by apayee or holder in due course as mandated under Section 142(a)Eof the NI Act; (b) the payee was the Company and a perusal of the complaintdid not show that the complaint was filed by the Company. It hadbeen filed by the appellant who had described himself as theManaging Director of the Company only in the cause title of theFcomplaint;

(c) probably a conscious choice was made to not file the complaintin the name of the Company as it was unclear whether theCompany was authorised to advance loans.

G9. We may note that the High Court did not give its imprimatur tothe entire reasoning of the trial court as it noticed that the demand noticewas sent on behalf of the Company. Thus, the Company was aware thatthe complaint had to be filed by the Company itself. It was observed thatthe aforesaid aspect was probably left vague on purpose by the Companyand therefore, it was opined that the complaint had not been filed by theHpayee in terms of Section 142 of the NI Act.

Complainant’s/Appellant’s submissions:

10. The appellant contended before us that it was quite apparentfrom the cause title of the complaint which is an integral part of thecomplaint, that the same had been filed on behalf of the Company. Itwas further contended that this was the reason that the Board Resolutionauthorising the Managing Director to file a complaint for dishonour ofthe cheques was annexed. The address given was of the Company,which was the registered office address. The affidavit filed in the cross-examination in pursuance thereto left no manner of doubt that thecomplaint was filed as the Managing Director of the Company.

11. It is the say of the appellant that there is a presumption underSection 139 and 118 of the NI Act which was not rebutted by therespondent. It was further contended that a duly signed cheque wassufficient to raise a presumption under Section 139 of the NI Act againstthe respondent as held in Triyambak S. Hegde v. Sripad[1]. It was notthe say of the respondent in defence that the cheque was not signed byhim or was signed under any fraud or misrepresentation.

12. It was submitted that a very hyper technical view of the matterhad been taken and it only related to the format of the filing of thecomplaint and not the substance. The trial court itself had accepted thatthe complaint was filed on behalf of the Company as otherwise it wouldhave refused to take cognizance under Section 142(a) of the NI Act.The respondent had not even challenged the summoning order on theground that the complaint is not filed on behalf of the Company.

Respondent’ssubmissions:

13. Learned counsel for the respondent, however, contended thatthe appellant had failed to prove his case beyond reasonable doubt andthe complaint itself was not in a proper form. The complaint and theBoard Resolution did not lead to a conclusion that it was filed on behalfof the Company. The Board Resolution was also not signed by theDirectors of the Company nor does it find that it authorises the complainantto file the complaint.

14. The respondent also contended that no loan was advanced bythe Company nor has it been proved as to whose account the alleged 1 Crl. Appeal Nos. 849-850/2011 decided on 23.09.2021.

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Aloan was advanced to. No loan agreement in favour of the Companywas placed on record.

OurView:

15. We have examined the submissions of the learned counsel forthe parties.B

16. To decide the controversy the relevant Sections of the NIAct are extracted as under:

“138. Dishonour of cheque for insufficiency, etc., of fundsin the account. — Where any cheque drawn by a person on anaccount maintained by him with a banker for payment of anyamount of money to another person from out of that account forthe discharge, in whole or in part, of any debt or other liability, isreturned by the bank unpaid, either because of the amount ofmoney standing to the credit of that account is insufficient to honourthe cheque or that it exceeds the amount arranged to be paid fromthat account by an agreement made with that bank, such personshall be deemed to have committed an offence and shall, withoutprejudice to any other provision of this Act, be punished withimprisonment for [a term which may be extended to two years],or with fine which may extend to twice the amount of the cheque,or with both:

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Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period ofsix months from the date on which it is drawn or within the periodof its validity, whichever is earlier; F

(b) the payee or the holder in due course of the cheque, as thecase may be, makes a demand for the payment of the said amountof money by giving a notice; in writing, to the drawer of thecheque, [within thirty days] of the receipt of information by himfrom the bank regarding the return of the cheque as unpaid; and G

(c) the drawer of such cheque fails to make the payment of thesaid amount of money to the payee or, as the case may be, tothe holder in due course of the cheque, within fifteen days of thereceipt of the said notice.”

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“139. Presumption in favour of holder.— It shall be presumed,unless the contrary is proved, that the holder of a cheque receivedthe cheque of the nature referred to in section 138 for the discharge,in whole or in part, of any debt or other liability.”

.... .... .... .... ....

“118. Presumptions as to negotiable instruments.— Untilthe contrary is proved, the following presumptions shall bemade:—

(g) that holder is a holder in due course:— that the holder of anegotiable instrument is a holder in due course : provided that,where the instrument has been obtained from its lawful owner, orfrom any person in lawful custody thereof, by means of an offenceor fraud, or has been obtained from the maker or acceptor thereofby means of an offence or fraud, or for unlawful consideration,the burden of proving that the holder is a holder in due course liesupon him.”

“142. Cognizance of offences.— Notwithstanding anythingcontained in the Code of Criminal Procedure, 1973 (2 of 1974),—

(a) no court shall take cognizance of any offence punishable undersection 138 except upon a complaint, in writing, made by the payeeor, as the case may be, the holder in due course of the cheque; (b) such complaint is made within one month of the date on whichthe cause of action arises under clause (c) of the proviso to section138:

[Provided that the cognizance of a complaint may be taken by theCourt after the prescribed period, if the complainant satisfies theCourt that he had sufficient cause for not making a complaintwithin such period;]

(c) no court inferior to that of a Metropolitan Magistrate or aJudicial Magistrate of the first class shall try any offence punishableunder section 138.”

17. We must say at the inception that the respondent not havingdisputed his signatures on the cheques, it was for the respondent toshow in what circumstances the cheques had been issued, i.e., why was A

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Ait not a cheque issued in due course. The words of Section 139 of the NIAct are quite clear that unless the contrary is proved, it shall be presumedthat the holder of the cheque received the cheque of the nature referredto in Section 138 for the discharge, in whole or in part, of any debt orother liability. The respondent has not set up a case that the nature oftransaction was of the nature which fell beyond the scope of SectionB138. Other than taking a technical objection, really nothing has been saidon the substantive aspect.

18. The only eligibility criteria prescribed under Section 142(1)(a)is that the complaint must be by the payee or the holder in due course.C19. In the conspectus of the aforesaid principles we have to dealwith the plea of the respondent that the complaint was not filed by thecompetent complainant as it is the case that the loan was advanced bythe Company. As to what would be the governing principles in respect ofa corporate entity which seeks to file the complaint, an elucidation canbe found in the judgment of this Court in Associated Cement Co. Ltd. v.DKeshavanand[2]. If a complaint was made in the name of the Company,it is necessary that a natural person represents such juristic person in thecourt and the court looks upon the natural person for all practical purposes.It is in this context that observations were made that the body corporateis a de jure complainant while the human being is a de facto complainantEto represent the former in the court proceedings. Thus, no Magistratecould insist that the particular person whose statement was taken onoath alone can continue to represent the Company till the end of theproceedings. Not only that, even if there was initially no authority theCompany can at any stage rectify that defect by sending a competentperson.F

20. The aforesaid judgment was also taken note of in a subsequentjudgment of this Court in M.M.TC Ltd. & Anr. v. Medchl Chemicalsand Pharma (P) Ltd. & Anr.[3].

21. We find that the judicial precedents cited aforesaid have beenGbreached by the Courts below. The High Court also embarked on adiscussion as to the vagueness of the identity of the complainant and itsrelation with the legality of a loan which may be granted by the Company,something that was not required to be gone into.

2 (1998) 1 SCC 687.3H (2002) 1 SCC 234.

22. If we look at the format of the complaint which we haveextracted aforesaid, it is quite apparent that the Managing Director hasfiled the complaint on behalf of the Company. There could be a formatwhere the Company’s name is described first, suing through the ManagingDirector but there cannot be a fundamental defect merely because thename of the Managing Director is stated first followed by the post held inthe Company.

23. It is also relevant to note that a copy of the Board Resolutionwas filed along with the complaint. An affidavit had been brought onrecord in the trial court by the Company, affirming to the factum ofauthorisation in favour of the Managing Director. A Manager or aManaging Director ordinarily by the very nomenclature can be takento be the person in-charge of the affairs Company for its day-to-daymanagement and within the activity would certainly be calling the act ofapproaching the court either under civil law or criminal law for settingthe trial in motion.[4] It would be too technical a view to take to defeat thecomplaint merely because the body of the complaint does not elaborateupon the authorisation. The artificial person being the Company had toact through a person/official, which logically would include the Chairmanor Managing Director. Only the existence of authorisation could beverified.

24. While we turn to the authorisation in the present case, it wasa copy and, thus, does not have to be signed by the Board Members, asthat would form a part of the minutes of the Board meeting and not atrue copy of the authorisation. We also feel that it has been wronglyconcluded that the Managing Director was not authorised. If we perusethe authorisation in the form of a certified copy of the Resolution, itstates that legal action has to be taken against the respondent for dishonourof cheques issued by him to discharge his liabilities to the Company. Tothis effect, Mr. Bhupesh Rathod/Sashikant Ganekar were authorised toappoint advocates, issues notices through advocate, file complaint,verifications on oath, appoint Constituent attorney to file complaint in thecourt and attend all such affairs which may be needed in the process oflegal actions. What more could be said?

25. The finding by the Courts below as to the lack of authorisationto depose also, thus, stands nullified.

4 Credential Finance Ltd. v. State of Maharashtra 1998(3) Mh.L.J. 805.

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A26. The description of the complainant with its full registered officeaddress is given at the inception itself except that the Managing Director’sname appears first as acting on behalf of the Company. The affidavitand the cross-examination in respect of the same during trial supportsthe finding that the complaint had been filed by the Managing Directoron behalf of the Company. Thus, the format itself cannot be said to beBdefective though it may not be perfect. The body of the complaint neednot be required to contain anything more in view of what has been setout at the inception coupled with the copy of the Board Resolution. Thereis no reason to otherwise annex a copy of the Board Resolution if thecomplaint was not being filed by the appellant on behalf of the Company.C

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27. In our view, one of the most material aspects is, as statedaforesaid, that the signatures on the cheques were not denied. Neitherwas it explained by way of an alternative story as to why the dulysigned cheques were handed over to the Company. There was no pleaof any fraud or misrepresentation. It does, thus, appear that faced withDthe aforesaid position, the respondent only sought to take a technicalplea arising from the format of the complaint to evade his liability. Therewas no requirement of a loan agreement to be executed separately asany alternative nature of transaction was never stated.

Conclusion:

E

Conclusion:

E

28. We are, thus, of the view that both the impugned orders of thetrial court and the High Court cannot be sustained and are required to beset aside. The finding is, thus, reached that the complaint was properlyinstituted and the respondent failed to disclose why he did not meet thefinancial liability arising to a payee, who is a holder of a cheque in dueFcourse.

29. We now turn to what would be the result of the aforesaidfinding. The complaint was instituted in July, 2006. Fifteen (15) yearshave elapsed since then. The punishment prescribed for such an offenceunder Section 138 of the NI Act is imprisonment for a term which mayGextend to two years, or with fine which may extend to twice the amountof the cheque, or with both. We are of the view that in the given scenariothe respondent should be sentenced with imprisonment for a term of oneyear and with fine twice the amount of the cheque, i.e., Rs.3,20,000/-.However, in view of passage of time, we provide that if the respondentpays a further sum of Rs.1,60,000/- to the appellant, then the sentenceH

would stand suspended. The needful be done by the respondent withintwo (2) months from today. The appellant would also be entitled to costs.

30. The appeal accordingly stands allowed in the aforesaid terms.

Devika Gujral

Appeal allowed.

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