Read Judgment: M/s Trl Krosaki Refractories Ltd. V. M/s Sms Asia Private Limited & Anr. 

Pankaj Bajpai

New Delhi, February 24, 2022: While considering an issue as to whether the complaint filed u/s 138 of the Negotiable Instruments Act, 1881was in accordance with the requirement u/s 142, the Supreme Court has opined that when a company is the payee of the cheque based on which a complaint is filed u/s 138, the complainant necessarily should be the Company which would be represented by an employee who is authorized. 

Prima facie, in such a situation the indication in the complaint and the sworn statement (either orally or by affidavit) to the effect that the complainant (Company) is represented by an authorized person who has knowledge, would be sufficient, added the Court. The Larger Bench of Chief Justice N.V. Ramana, Justice A.S. Bopanna and Justice Hima Kohli also noted that when the complainant/payee is a company, an authorized employee can represent the company. Such averment and prima facie material is sufficient for the learned Magistrate to take cognizance and issue process.

The Bench observed that all that is necessary is to demonstrate before the Magistrate that the complaint filed is in the name of the “payee” and if the person who is prosecuting the complaint is different from the payee, the authorization therefore and that the contents of the complaint are within his knowledge.

In such circumstances entertaining a petition u/s 482 to quash the order taking cognizance by the Magistrate would be unjustified when the issue of proper authorization and knowledge can only be an issue for trial, added the Bench.

Going by the background of the case, Sms Asia (Respondent) had issued seven cheques, in total amounting to Rs.1,10,00,000 in favour of the appellant company. On presentation, the said cheques were dishonoured by the Bank and returned with the endorsement, ‘account closed’. Since the respondent failed to comply with demand notices, the appellant filed a complaint before the Sub-Divisional Judicial Magistrate (SDJM) u/s 138 & 142 of Negotiable Instruments Act, 1881. 

The SDJM on being satisfied that there is sufficient material and the complaint u/s 138 of N.I. Act against the accused is in accordance with law, took cognizance of the complaint and directed summons to the respondent-accused, who however filed a petition u/s 482 of CrPC before the High Court. The respondent contended that the complaint filed was by an incompetent person without the requisite averments in the complaint, despite which the SDJM had taken cognizance and issued summons. 

The High Court therefore held that there is no mention in the complaint or affidavit as to when and in what manner the company had authorized its General Manager (Accounting) to represent the company to file the complaint. It was further held that there was no averment in the complaint as to whether the General Manager (Accounting) had knowledge about the transaction or he was a witness to the transaction. Hence, this appeal was filed. 

After considering the submissions, the Top Court found from perusal of the complaint that the complainant named therein was M/s. TRL Krosaki Refractories Limited through its General Manager (Accounting) Subhasis Kumar Das.

A perusal of the cheques which were the subject matter of the said complaint u/s 138 of NI Act would disclose that the “payee” named in the said cheques was M/s. TRL Krosaki Refractories Limited, and if that be the position, the requirement as contemplated u/s 142(1)(a) of NI Act that the complaint ought to be in writing and that it should be filed by the payee or the holder in due course, stood satisfied, added the Court. 

The Managing Director apart from himself being the key managerial personnel of the appellant company, has also been delegated the power by the Board of Directors through the document dated 06.04.1998. Through the said document the Managing Director has been delegated, in general, all powers necessary for the management and operation of the company and it has been specified among others, to exercise the power relating to important issues affecting the company’s land and property. Through the said document, the Managing Director is also empowered to delegate where necessary and to the extent required, any of the powers delegated to him, to his subordinate officers. The above noted documents would disclose that the complaint u/s 138 NI Act was filed on behalf of the “payee” company with due authorization”, added the Bench.

Hence, the Apex Court set aside the order passed by the High Court. 

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